- 41 -
For the reasons discussed below, we conclude that the estate
has satisfied section 2703(b)(3). By its terms, the statute
requires only a showing that the agreement's terms are
"comparable" to similar arrangements entered at arm's length.
While the regulations caution against using "isolated
comparables", we believe that in context the regulations
delineate more of a safe harbor than an absolute requirement that
multiple comparables be shown.
In any event, the price terms reached in the 1994 Agreement,
and incorporated in the 1995 FSA, were in fact based on a survey
of comparables. The conservator sought professional advice from
within Boatmen's, and was advised that the $118 price (1.25 times
book value) was a fair price for decedent's FABG stock and Hill
Rights, when coupled with the deferred sale feature of the 1994
Agreement. The deposition of the valuation specialist who
advised the conservator (taken in connection with the district
court proceedings) is in the record, and it indicates that the
28(...continued)
In addition, the bill adds a third
requirement, not found in present law, that
the terms of the option, agreement, right or
restriction be comparable to similar
arrangements entered into by persons in an
arm's length transaction. This requires that
the taxpayer show that the agreement was one
that could have been obtained in an arm's
length bargain. * * * It is not met simply by
showing isolated comparables but requires a
demonstration of the general practice of
unrelated parties. [136 Cong. Rec. 30,541
(1990); emphasis added.]
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