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the 1996 Agreement is invalid, in which case it cannot control
value because it is not enforceable, see Estate of Carpenter v.
Commissioner, T.C. Memo. 1992-653, or the 1996 Agreement is a
novation of the 1981 Agreement, in which case the 1996 Agreement
stands alone as the operative agreement and is entitled to no
weight because it lacks restrictions on lifetime transfers, see
sec. 20.2031-2(h), Estate Tax Regs. The estate contends that the
1996 Agreement modifies the 1981 Agreement and that the two
agreements must be read together, with the 1981 Agreement’s
restrictions on lifetime transfers surviving the modification.
As all the relevant events occurred in Georgia, and the 1981
Agreement specifies that it will be subject to and governed by
the laws of the State of Georgia, we analyze these claims under
Georgia law.
Respondent contends the 1996 Agreement is invalid because
decedent, a trustee of the ESOP, breached a fiduciary duty to the
ESOP participants in entering into the agreement. Respondent
argues that, were the ESOP to adopt the $92.85 price per share
implicit in the 1996 Agreement, a price almost 50 percent lower
than the $164.01 per-share value determined by BVS in its January
31, 1997, appraisal, one-half of BCC’s value would disappear, to
the detriment of the ESOP participants.
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