Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 73

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          progress at his death.  The consideration for this purchase was             
          designated as the proceeds from two $2.5 million life insurance             
          policies on the shareholder’s life that the firm was required to            
          obtain under the agreement.                                                 
               Upon the shareholder’s death, the firm paid the $5,062,02937           
          insurance proceeds to the shareholder’s estate.  The taxpayer               
          took the position that the entire $5,062,029 was paid for the               
          shareholder’s stock, whereas the Commissioner determined that               
          approximately $4 million was paid for the shareholder’s interest            
          in work in progress (and, therefore, was income in respect of a             
          decedent).  Concluding that the insurance proceeds were                     
          consideration for both the stock and the shareholder’s interest             
          in work in progress, this Court undertook to allocate the                   
          consideration between the two by determining the stock’s fair               
          market value at the shareholder’s death, and treating the                   
          insurance proceeds in excess of that fair market value as                   
          consideration paid for the shareholder’s interest in work in                
          progress.  In determining the fair market value of the stock, we            
          rejected the taxpayer’s argument that the $5 million in insurance           
          proceeds should be treated as a nonoperating asset of the firm,             

               37 The policy proceeds that served as consideration for the            
          purchase were construed by the parties as comprising the two $2.5           
          million death benefits plus $62,029 in premium adjustments and              

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