Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 27

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               In 1990, section 2703 was enacted.  Omnibus Budget                     
          Reconciliation Act of 1990 (OBRA), Pub. L. 101-508, sec.                    
          11602(a), 104 Stat. 1388-491.  It provides that any agreement to            
          acquire property at less than its fair market value will be                 
          disregarded in valuing such property for Federal estate tax                 
          purposes unless the agreement satisfies certain requirements                
          enumerated in the statute.  Those requirements include the                  
          requirements of preexisting law that the agreement be a bona fide           
          business arrangement and not a testamentary device as well as a             
          new requirement that the terms of the agreement be comparable to            
          those of similar arrangements negotiated at arm’s length.  Sec.             
          2703(b).  Section 2703 applies to agreements created or                     
          substantially modified after October 8, 1990.  OBRA sec.                    
          11602(e), 104 Stat. 1388-500; sec. 25.2703-2, Gift Tax Regs.                
               As the legislative history makes clear, section 2703 was               
          intended to supplement, not supplant, the existing legal                    
          requirements:  “The bill does not otherwise alter the                       
          requirements for giving weight to a buy-sell agreement.  For                
          example, it leaves intact present law rules requiring that an               
          agreement have lifetime restrictions in order to be binding on              

          Commissioner, T.C. Memo. 1974-39 (to same effect).                          

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Last modified: May 25, 2011