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B. Whether the Price for the DGA Stock at Issue Was an Arm’s-
Length Price
Petitioner points out that the 1999 price paid for the DGA
stock at issue was set by Empire and contends that the parties
properly structured and documented the sales of stock at issue as
arm’s-length transactions, thus establishing the fair market
value of the DGA stock at issue. We disagree.
Intrafamily transfers are presumed to be gifts. Frazee v.
Commissioner, 98 T.C. 554, 561 (1992); Harwood v. Commissioner,
82 T.C. 239, 258 (1984), affd. without published opinion 786 F.2d
1174 (9th Cir. 1986). While the presumption may be overcome with
evidence, see, e.g., Estate of Stone v. Commissioner, T.C. Memo.
2003-309, we conclude that petitioner has not done so.
The transactions were designed by petitioner’s counsel to
serve petitioner’s estate planning goals. The facts that payment
of the 1999 notes need not have been made if petitioner had not
survived until they were due7 and that the 1999 and 2000 notes
contain a share adjustment clause show that the transactions were
for estate planning purposes.
Petitioner’s sons were not represented by their own counsel
in the transactions. Petitioner’s sons did not negotiate the
terms of the agreements, and while that is not dispositive, see
Estate of Thompson v. Commissioner, 382 F.3d 367, 382 (3d Cir.
7 See discussion of the self-canceling clauses below at
par. D.
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