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v. Commissioner, 148 F.2d 285 (9th Cir. 1945); sec. 20.2031-2(h),
Estate Tax Regs.
The 1981 Agreement provided that no “Shareholder” could
transfer his BCC shares without the written consent of the other
“Shareholders.”18 Because the 1996 Agreement was not a novation
but merely a modification of the 1981 Agreement, the latter’s
provision requiring “Shareholders” to consent to any lifetime
transfer of BCC shares survived. The estate argues that the
Modified 1981 Agreement was binding during decedent’s life
because any lifetime transfer of decedent’s BCC shares required
the consent of other shareholders; namely, the ESOP. Respondent
argues that the requirement of shareholder consent was not
sufficient to satisfy the binding-during-life requirement, and,
in any event, the ESOP’s consent was not a meaningful restriction
18 The 1981 Agreement also set forth an endorsement that was
required to be placed on BCC’s stock certificates. The
endorsement cross-referenced the 1981 Agreement’s requirement of
shareholder consent to transfers of stock, and, in addition,
provided that shares must first be offered for sale to BCC and
other shareholders before being offered or sold to third parties.
There is no evidence in the record that this endorsement was
actually placed on any BCC stock certificate; the only
certificates in the record do not contain it, and the parties
have not addressed it. In any event, since the mandated
endorsement cross-referenced the requirement of shareholder
consent to transfers, we conclude that the endorsement’s
additional reference to a right of first refusal in no way
derogates the requirement of shareholder consent.
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