- 14 -
2053(c)(1)(A) for the $400,000 she agreed to pay Advance Leasing
in exchange for the 4,000 additional shares.
4. Whether the Stock Subscription Transaction Was
Contracted Bona Fide
The estate contends that the $400,000 stock subscription
agreement (the agreement to pay $400,000 in exchange for 4,000
shares of Advance Leasing common stock) was contracted bona fide.
We disagree.
“Contracted bona fide” means made in good faith and
bargained for at arm’s length. Secs. 20.2043-1(a), 20.2053-4,
Estate Tax Regs.; see Bank of New York v. United States, 526 F.2d
1012, 1015 (3d Cir. 1975); Estate of Morse v. Commissioner, 69
T.C. 408, 418 (1997), affd. 625 F.2d 133 (6th Cir. 1980). When
family members adopt a course of action with the intent to pass
on wealth, a deduction for the amount transferred is not
permitted under section 2053 unless there was a bargained-for
exchange. Estate of Huntington v. Commissioner, 16 F.3d 462, 467
(1st Cir. 1994), affg. 100 T.C. 313 (1993). McBride was
decedent’s attorney in fact and Advance Leasing’s sole director
and officer; thus, he was on both sides of the stock subscription
transaction. That transaction must be subjected to enhanced
scrutiny. See Bank of New York v. United States, supra at 1016-
1017; Estate of Woody v. Commissioner, 36 T.C. 900, 903 (1961).
The estate contends that the stock subscription agreement
was bona fide because: (1) Decedent wanted Advance Leasing to
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 Next
Last modified: May 25, 2011