- 49 -
Thus, Congress contemplated that business “comparables” that
established “the general practice of unrelated parties” would
constitute the evidence satisfying section 2703(b)(3), and that
“expert testimony” could be used for this purpose.
The regulations under section 2703 also contemplate the
introduction of evidence of actual comparable transactions.
Section 25.2703-1(b)(4), Gift Tax Regs., provides in relevant
part:
(4) Similar arrangement. (i) In general. A right
or restriction is treated as comparable to similar
arrangements entered into by persons in an arm’s length
transaction if the right or restriction is one that
could have been obtained in a fair bargain among
unrelated parties in the same business dealing with
each other at arm’s length. A right or restriction is
considered a fair bargain among unrelated parties in
the same business if it conforms with the general
practice of unrelated parties under negotiated
agreements in the same business. * * *
(ii) Evidence of general business practice.
Evidence of general business practice is not met by
showing isolated comparables. * * * It is not
necessary that the terms of a right or restriction
parallel the terms of any particular agreement. If
comparables are difficult to find because the business
is unique, comparables from similar businesses may be
used.
In light of the statutory language, the legislative history,
and the regulations, we conclude that section 2703(b)(3) requires
a taxpayer to demonstrate that the terms of an agreement
providing for the acquisition or sale of property for less than
fair market value are similar to those found in similar
Page: Previous 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 NextLast modified: May 25, 2011