- 43 -
results in an option price that more closely approximates fair
market value” is de minimis. The estate asserts that the book
value price under the 1981 Agreement for decedent’s shares at the
time of the 1996 modification was $4.2 million. It further
asserts that the fair market value of decedent’s shares at the
time of the modification was $3,736,242, as demonstrated by the
1996 BVS appraisal. The estate claims that the change in price
of decedent’s shares from $4.2 to $4 million thus qualifies as de
minimis under section 25.2703-1(c)(2)(iv), Gift Tax Regs.,
because it results in a price that more closely reflected the
fair market value of decedent’s BCC shares.
Assuming, arguendo, that the purchase price in the 1981
Agreement is an “option price”, this argument fails because the
estate’s calculation of BCC’s book value and fair market value at
the time of the modification is flawed. In calculating the book
value price for decedent’s BCC shares under the 1981 Agreement,
the estate’s argument assumes that BCC had 92,718 shares
outstanding. At the time decedent modified the 1981 Agreement,
however, BCC had redeemed Mr. Jennings’s shares, and there were
only 51,772 shares outstanding. Dividing BCC’s book value as of
January 31, 1996 ($9,135,506),24 by the actual number of shares
24 While the Jan. 31, 1996, book value would not reflect
BCC’s transfer of $1,990,791 in cash and a $1 million note to Mr.
(continued...)
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