- 30 -
Transactions in BCC stock between the ESOP and other
parties, including shareholders and plan participants, must be
effected at values established by an independent appraiser. See
sec. 401(a)(28)(C). Respondent does not explain the basis on
which the ESOP trustees could adopt the per-share value contained
in the 1996 Agreement. Nor are we aware of one.16
More fundamentally, decedent’s agreement to have his BCC
shares redeemed at a price that respondent himself urges was
below fair market value actually inured to the benefit of the
ESOP participants. Before the redemption, the ESOP’s 8,692
shares represented approximately 17 percent of the outstanding
equity interests in BCC. After the redemption, the ESOP’s shares
represented 100-percent ownership of BCC. The redemption of
decedent’s shares at a bargain price left relatively more
corporate assets for the ESOP owners than would have been the
case at a higher redemption price, thus increasing rather than
decreasing the value of the BCC shares held by the ESOP and its
participants. Accordingly, respondent’s contention that
16 While a subsequent appraisal of BCC’s outstanding shares
might consider the price at which decedent’s BCC shares had been
redeemed, such a non-arm’s-length sale between a corporation and
its controlling shareholder would presumably be disregarded as an
indicator of fair market value. Indeed, BVS did not consider
either the obligation to redeem decedent’s BCC shares or the
actual redemption of those shares for $4 million in its 1997 or
1998 appraisal.
Page: Previous 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 NextLast modified: May 25, 2011