- 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 similarPage: Previous 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 Next
Last modified: May 25, 2011