Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 26

                                       - 26 -                                         
               An exception to the general valuation rule exists where the            
          property in question is subject to an enforceable buy-sell                  
          agreement.  See, e.g., St. Louis County Bank v. United States,              
          674 F.2d 1207, 1210 (8th Cir. 1982); Bommer Revocable Trust v.              
          Commissioner, T.C. Memo. 1997-380.  However, for a buy-sell                 
          agreement to control value for Federal estate tax purposes, it              
          must meet certain requirements set forth in section 20.2031-2(h),           
          Estate Tax Regs., Rev. Rul. 59-60, 1959-1 C.B. 237, and the                 
          caselaw.  We summarized those requirements in Estate of Lauder v.           
          Commissioner, T.C. Memo. 1992-736, as follows:                              
               It is axiomatic that the offering price must be fixed                  
               and determinable under the agreement.  In addition, the                
               agreement must be binding on the parties both during                   
               life and after death.  Finally, the restrictive                        
               agreement must have been entered into for a bona fide                  
               business reason and must not be a substitute for a                     
               testamentary disposition.  [Citations omitted.]                        
          Buy-sell agreements that fail to meet these requirements are                
          disregarded in determining value.  Estate of Weil v.                        
          Commissioner, 22 T.C. 1267, 1274 (1954); Estate of Lauder v.                
          Commissioner, supra; sec. 20.2031-2(h), Estate Tax Regs.14                  

               14 While sec. 20.2031-2(h), Estate Tax Regs., provides that            
          agreements not binding during life will be accorded “little                 
          weight”, whereas binding-during-life agreements found to be                 
          testamentary devices will be “disregarded”, this difference in              
          nomenclature carries no practical import.  See, e.g., Hoffman v.            
          Commissioner, 2 T.C. 1160, 1178-1180 (1943) (agreement not                  
          binding during life disregarded), affd. sub nom. Giannini v.                
          Commissioner, 148 F.2d 285 (9th Cir. 1945); Estate of Caplan v.             

Page:  Previous  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  35  Next

Last modified: May 25, 2011