Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 54

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          in the Modified 1981 Agreement was a fair market price value.               
          Accordingly, his conclusion that the Modified 1981 Agreement                
          established a price comparable to those of similar arrangements             
          entered into at arm’s length by people in similar businesses is             
               While we do not doubt that a corporation’s redemption of a             
          shareholder’s stock that is subject to a restrictive agreement,             
          as here, might well occur at an arm’s-length price less than fair           
          market value, the failure of Mr. Grizzle’s proof leaves us only             
          to speculate as to what such a below-fair-market-value, yet                 
          arm’s-length, price might be.  Decedent set a price in the 1996             
          Agreement that he believed was the most BCC could pay without               
          impairing its liquidity.  But this $4 million price was reached             
          between decedent and his controlled corporation, with the                   
          remaining shareholder excluded.  The best evidence we have on               
          this record of an arm’s-length arrangement involving the BCC                
          stock is the unmodified 1981 Agreement, which was negotiated                
          between decedent and his brother-in-law when both were 50-percent           
          shareholders and neither knew who would survive the other.  The             
          redemption price set in that agreement was (i) book value or (ii)           
          whatever price these two shareholders, in relatively equal                  
          bargaining positions, could annually agree upon.  Given the                 
          disparity in the prices dictated in the 1981 Agreement versus the           

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Last modified: May 25, 2011