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Tax Regs. We have previously summarized those requirements as
follows:
It is axiomatic that the offering price must be fixed
and determinable under the agreement. In addition, the
agreement must be binding on the parties both during
life and after death. Finally, the restrictive
agreement must have been entered into for a bona fide
business reason and must not be a substitute for a
testamentary disposition. * * * [Estate of Lauder v.
Commissioner, T.C. Memo. 1992-736; citations omitted.]
Agreements that fail to meet these requirements are disregarded
in determining value. See Estate of Weil v. Commissioner, 22
T.C. 1267, 1274 (1954); sec. 20.2031-2(h), Estate Tax Regs.
Section 2703, enacted in 1990, also governs restrictive
agreements. Omnibus Budget Reconciliation Act of 1990, Pub. L.
101-508, sec. 11602, 104 Stat. 1388-491. The general rule of
section 2703 is that any agreement to acquire property at less
than its fair market value will be disregarded for Federal estate
tax purposes unless the agreement satisfies the requirements
enumerated in the statute. Those requisites include the
requirements of preexisting law that the agreement be a bona fide
business arrangement and not be a testamentary device, as well as
a new requirement that the terms of the agreement be comparable
to those of similar arrangements entered at arm's length. Sec.
2703(b).
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