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participants, who were BCC’s employees and not members of
decedent’s family. We are persuaded that the ESOP participants,
who had no personal relationship with decedent outside of work,
were not the natural objects of decedent’s bounty. Thus, the
Modified 1981 Agreement is not a device to pass decedent’s BCC
shares to either his family or the natural objects of his bounty
for less than adequate consideration, and the estate has
satisfied section 2703(b)(2).26
We need not decide whether decedent’s designation of a
below-market redemption price for his shares in the Modified 1981
Agreement, which was based on his understanding of BCC’s
available cash after accounting for operational cash needs and
the obligation to repurchase the shares of the ESOP participants,
constitutes a bona fide business arrangement under section
2703(b)(1), because we conclude that the estate has not shown
26 Sec. 2703(b)(2) uses the term “family”, while sec.
25.2703-1(b)(1)(ii), Gift Tax Regs., uses the term “natural
objects of the transferor’s bounty” when referring to transferees
of property for less than adequate consideration. Sec. 20.2031-
2(h), Estate Tax Regs., also uses the term “natural objects
of * * * [the transferor’s] bounty”. Legislation amending sec.
2703(b)(2) to conform the statute’s language to the regulations
has twice been passed in the House of Representatives, but never
enacted. See 137 Cong. Rec. 35312, 35323 (1991); 138 Cong. Rec.
17691, 17729 (1992); H. Rept. 102-631, at 326 (1992). Because we
find that the ESOP participants were neither decedent’s family
nor the natural objects of his bounty, we do not reach the
question of whether these terms should be treated as synonymous
for purposes of sec. 2703.
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