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personally to guarantee the Puccio and Safeco loans; (3) a loan
agreement where Hillgren extended a $1 million line of credit to
decedent; and (4) a security agreement encumbering the three
Orange County properties, giving Hillgren the authority, for
29 years, to determine whether to sell any of the four properties
subject to the BLA and to grant an irrevocable power of attorney
to Hillgren for the duration of the ownership of the properties.
Because Hillgren had performed under the agreement, he was
entitled to be compensated under it, regardless of the death of
decedent. We agree with the estate’s analysis.
Respondent contends that the BLA was superseded by the LKHP
partnership agreement, and the estate argues that the subject
matter of each agreement was separate. We have decided that the
partnership agreement was not respected by decedent or Hillgren
and will be disregarded. The BLA, however, had apparent business
purposes. Moreover, a hypothetical buyer would not disregard or
ignore the BLA. See Estate of Newhouse v. Commissioner, supra at
231; Estate of Hall v. Commissioner, supra at 338-339. As a
result, we value the University property and the Orange County
properties subject to the effect of the BLA.
The Higgins appraisal attached to the estate tax return
assumed, based on Albrecht’s erroneous instructions, that
Hillgren held a 25-percent operational interest and a .05-percent
profit interest. The Higgins appraisal essentially used the
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