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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.
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