Estate of George C. Blount, Deceased, Fred B. Aftergut, Executor - Page 74

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          augmenting the value of its stock, on the grounds that the                  
          insurance proceeds were offset by the firm’s obligation to pay              
          them over to the estate.  In so concluding, we relied on Estate             
          of Huntsman v. Commissioner, 66 T.C. 861 (1976), as follows:  “We           
          said in Estate of Huntsman that a buyer would not pay more for              
          stock based on the corporation’s ownership of life insurance if             
          the proceeds would be largely offset by the corporation’s                   
          liabilities.  That is the case here.”  Estate of Cartwright v.              
          Commissioner, T.C. Memo. 1996-286 (citation omitted).  The Court            
          of Appeals for the Ninth Circuit affirmed our position that the             
          life insurance proceeds would not be considered by a hypothetical           
          willing buyer in these circumstances.  Estate of Cartwright v.              
          Commissioner, 183 F.3d at 1038.                                             
               Estate of Cartwright is distinguishable.  The lion’s share             
          of the corporate liabilities in that case which were found to               
          offset the insurance proceeds were not obligations of the                   
          corporation to redeem its own stock.  Rather, we determined that            
          approximately $4 million of the $5 million liability of the                 
          corporation was to compensate the decedent shareholder for                  
          services; i.e., for his interest in work in progress.  Thus, a              
          substantial portion of the liability was no different from any              
          third-party liability of the corporation that would be netted               

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