-57-
insufficient to establish that estate tax savings were decedent’s
predominant reason for forming Schutt I and II and to contradict
the estate’s contention that a true and significant motive for
decedent’s creation of the entities was to perpetuate his buy and
hold investment philosophy.
Given this conclusion regarding decedent’s motive, the
question then becomes whether perpetuation of a buy and hold
investment strategy qualifies as a “legitimate and significant
nontax reason” within the meaning of Estate of Bongard v.
Commissioner, 124 T.C. at __ (slip op. at 39). As respondent
points out, the buy and hold investment philosophy by definition
resulted in passive entities designed principally to hold the
DuPont and Exxon stock. Active management, trading, or
“churning” of the portfolios as a means of generating profits was
not intended. Furthermore, because each trust was funded with
the stock of a single issuer, asset diversification did not
ensue.
The Court of Appeals for the Third Circuit has in a similar
vein suggested that the mere holding of an untraded portfolio of
marketable securities weighs negatively in the assessment of
potential nontax benefits available as a result of a transfer to
a family entity. Estate of Thompson v. Commissioner, 382 F.3d at
380. As a general premise, this Court has agreed with the Court
of Appeals, particularly in cases where the securities are
Page: Previous 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 NextLast modified: May 25, 2011