Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 40

                                       - 40 -                                         
                    1.  Applicability of Section 2703                                 
               Section 2703 applies to agreements entered into or                     
          substantially modified” after October 8, 1990.  OBRA sec.                   
          11602(e); sec. 25.2703-2, Gift Tax Regs.  A “substantial                    
          modification” for this purpose is further defined in section                
          25.2703-1(c)(1), Gift Tax Regs., which provides that                        
               Any discretionary modification of a right or                           
               restriction, whether or not authorized by the terms of                 
               the agreement, that results in other than a de minimis                 
               change to the quality, value, or timing of the rights                  
               of any party with respect to property that is subject                  
               to the right or restriction is a substantial                           
               modification.  * * *                                                   
               The 1981 Agreement required BCC to purchase, and a deceased            
          shareholder’s estate to sell, the deceased shareholder’s BCC                
          shares at a price initially set at the book value of the shares             
          being redeemed.  This price automatically adjusted each year to             
          reflect increases in book value.  The 1981 Agreement allowed the            
          shareholders by agreement to set a different price annually on              
          August 1.  Thus, any shareholder could preserve the book value              
          redemption price by refusing to agree to reset the price.                   
          Assuming the parties did agree to change the purchase price on              
          August 1, absent further adjustment by agreement of the                     
          shareholders, the new price would automatically adjust annually             
          on the basis of increases in BCC’s book value.  BCC had the right           
          to pay for the redeemed stock in installments.                              

Page:  Previous  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  49  Next

Last modified: May 25, 2011