Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 46

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          Agreement is subject to section 2703.  See OBRA sec. 11602(e);              
          sec. 25.2703-2, Gift Tax Regs.                                              
                    2.  Section 2703(b)(3)                                            
               Section 2703(a) provides that in general any agreement or              
          right to acquire property at a price less than its fair market              
          value will be disregarded in valuing the property for Federal               
          estate tax purposes.  Section 2703(b) creates an exception to the           
          operation of section 2703(a), as follows:                                   
               SEC. 2703. CERTAIN RIGHTS AND RESTRICTIONS DISREGARDED.                
                    (b) Exceptions.--Subsection (a) shall not apply to any            
               option, agreement, right, or restriction which meets each of           
               the following requirements:                                            
                           (1) It is a bona fide business arrangement.                
                           (2) It is not a device to transfer such property           
                    to members of the decedent’s family for less than full            
                    and adequate consideration in money or money’s worth.             
                           (3) Its terms are comparable to similar                    
                    arrangements entered into by persons in an arms’ length           
               The estate contends that, in the event section 2703(a)                 
          applies to the Modified 1981 Agreement, all three requirements of           
          section 2703(b) have been met.  Respondent disagrees.  For the              
          reasons set forth below, we agree with respondent.                          
               With respect to the requirement of section 2703(b)(2), the             
          beneficiaries of a below-market redemption of decedent’s BCC                
          shares were the remaining BCC shareholders, namely the ESOP                 

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