- 75 -
against assets, including insurance proceeds, to ascertain net assets.
Concededly, a portion of the liability in Estate of
Cartwright constituted an obligation to redeem stock being
valued. Nonetheless, in contrast to the instant case, the buy-
sell agreement in Estate of Cartwright had not been disregarded
pursuant to section 20.2031-2(h), Estate Tax Regs., or section
2703; indeed, our principal task in Estate of Cartwright was to
construe the terms of the buy-sell agreement, which was fully
respected. Given the disregarded status of the buy-sell
agreement at issue here, Estate of Cartwright has no
application.38
Accordingly, we conclude that the $3,146,134 in insurance
proceeds due BCC upon decedent’s death should be treated as a
nonoperating asset of BCC and is not offset by BCC’s $4 million
obligation to redeem decedent’s shares.
E. Accounting for Insurance Proceeds
Having established that the life insurance proceeds are a
nonoperating asset that is not offset by BCC’s $4 million
obligation to redeem decedent’s shares, we turn next to the
38 Moreover, the life insurance proceeds in Estate of
Cartwright v. Commissioner, T.C. Memo. 1996-286, affd. in part
and remanded in part 183 F.3d 1034 (9th Cir. 1999), were
contractually earmarked and required to be paid over to the
decedent’s estate. No such requirement existed in the instant
case; BCC was free to use the insurance proceeds in any manner,
though it in fact paid them over in partial satisfaction of its
obligation to redeem decedent’s shares.
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