A recent decision by the Tenth Circuit Court of Appeals that found a decedent’s buy-sell agreement did not control the date of death value of a closely held business for estate tax purposes requires estate planners to give careful thought to the structure of such agreements. In affirming the Tax Court decision in H.A. True Jr. Est., the court upheld a fair-market value analysis instead of a formula setting forth the purchase price established by David True in a buy-sell agreement before his death. Attorney John W. Porter outlines the impact of the True decision in a recent issue of the Journal of Practical Estate Planning. At issue was whether the buy-sell agreement was created for bona fide business reasons and was not a testamentary substitute intended to pass on the decedent’s interest for full and adequate consideration. The Tax Court found that the latter was the case and the appeals court upheld that decision. There were many factors in the court’s review of the agreement that swayed that decision and Porter outlines these to show estate planners the critical steps necessary to create buy-sell agreements that will meet this new standard.
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This story is from the CCH’s monthly Focus on Tax newsletter, which provides advise and guidance on federal and state tax issues for tax and accounting professionals.
Read this article from CCH’s Journal of Taxation of Financial Products.