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agreement contained a valid restriction on lifetime transfers.21
However, it also expressly gave any shareholder owning 75 percent
of the shares the right to amend the agreement. The decedent
owned over 75 percent when the agreement was drafted and at all
times thereafter.22 Because the decedent had the unilateral
ability to amend the agreement, we concluded that the agreement
was not binding during his lifetime and disregarded it for
purposes of determining the stock’s value for Federal estate tax
purposes. We expressly rejected a claim that the decedent’s
ability to modify the agreement was limited by a fiduciary duty
he owed as a majority shareholder to the minority shareholders.
In Estate of True, the decedent was a party to a buy-sell
agreement, along with other shareholders and the corporation in
which they held stock. The decedent had a controlling interest
in the corporation. The Commissioner argued that the agreement
was not binding during the decedent’s lifetime because he had the
unilateral ability to amend the agreement by virtue of his
21 The agreement required any shareholder wishing to sell
his shares to offer those shares first to the corporation at the
same price payable upon his death.
22 The agreement was later amended to increase the
percentage of outstanding shares required to confer unilateral
amendment rights to an amount just exceeding the amount directly
owned by the decedent. However, additional shares deemed owned
by the decedent through attribution caused him to satisfy the
amended higher percentage requirement. Bommer Revocable Trust v.
Commissioner, T.C. Memo. 1997-380.
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