c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date uil conex-103103-07 the honorable henry a waxman member u s house of representatives west third street suite los angeles ca attention ------------------ dear congressman waxman this letter is in response to your inquiry dated --------------------------- on behalf of your constituent ----------------------- he contacted you about the effect of sec_409a of the internal_revenue_code the code on his participation in a nonqualified_deferred_compensation_plan that his employer sponsors the congress added sec_409a to the code as part of the american_jobs_creation_act_of_2004 public law stat which generally was effective on date under this legislation unless a nonqualified_deferred_compensation_plan meets certain requirements participants in the plan must include all amounts deferred under the plan in income immediately to the extent such amounts are not subject_to a substantial_risk_of_forfeiture in addition these amounts are subject_to certain additional taxes including an additional tax and a tax based on the interest on the tax underpayment that would have occurred had the amount been includible in income when first deferred or if later when not subject_to a substantial_risk_of_forfeiture sec_409a applies to amounts deferred on or after date or to amounts deferred before date if that plan is materially modified after date the law treats an amount as deferred before date if the employee’s right to the amount was earned and vested before date an employee’s right to an amount is earned and vested before date if as of date the right to the amount was not subject_to a condition requiring that the employee perform further services or any other condition that would constitute a substantial_risk_of_forfeiture these amounts often are referred to as grandfathered amounts one of the requirements of sec_409a is that an amount of deferred_compensation must be payable only upon one or more of the following events a specific date or a fixed schedule a separation_from_service death disability a change in control transaction an unforeseeable_emergency the plan may provide for payments at the earlier or later of a combination of these events for example the earlier of death disability a fixed date such as date or a separation_from_service ------------------wrote that he will not be able to receive a distribution upon a separation_from_service if he elects early retirement but continues to provide services on a per-diem basis on date we issued notice_2005_1 2005_2_cb_274 which provided initial guidance on the application of sec_409a q as-16 and of the notice provide guidance on the identification of the grandfathered amounts discussed above to which sec_409a would not apply as to these amounts the plan generally may continue to operate under the terms in effect before q a-19 of notice_2005_1 provided certain transition relief to help taxpayers comply with the requirements of sec_409a for deferred amounts subject_to sec_409a specifically in areas where we had not yet issued guidance taxpayers during could operate such plans in reasonable good_faith compliance with the terms of the statute we generally extended this reasonable good_faith compliance standard through notice irb q a-19 c of notice_2005_1 provided that during taxpayers could make new elections on when they would be paid amounts deferred under a nonqualified_deferred_compensation_plan without complying with the sec_409a rules governing these changes for example a participant whose payment was scheduled to occur at separation_from_service could make a new election for payment on a specific date or under a fixed schedule we also extended this relief through subject_to certain limitations preamble to the proposed_regulations section xi fed reg date notice_2006_79 irb on date we issued proposed_regulations under sec_409a that taxpayers may rely upon until final regulations become effective among the many topics addressed by the proposed_regulations is the definition of a separation_from_service for purposes of sec_409a the proposed_regulations generally provide that an employee separates from service when the employer and employee reasonably anticipate that the employee will no longer provide significant services we have received comments on the potential effects of this proposed definition on retirement programs where the employee continues to perform services after retirement such as on a part-time or per-diem basis we appreciate --------------------comments and will consider them as we write the final regulations again transition relief may be available if ------------------and his employer wish to take advantage of such relief for example ------------------and his employer may wish to consider whether changing --------------------payment schedule from a payment upon a separation_from_service to a fixed schedule of payments beginning on the earlier of separation_from_service or a fixed date after date may effectively address --------------------concerns see notice in addition the requirements of sec_409a generally would not affect any grandfathered amounts of deferred_compensation under the plan unless the plan is materially modified i hope this information is helpful if you have further questions please call me at -------- ---- --------------or ------------------------ ------------------ of my staff at ----- ------------- sincerely donald l korb chief_counsel


t c summary opinion united_states tax_court robert e and carol j cawvey petitioners v commissioner of internal revenue respondent docket no 9131-04s filed date robert e and carol j cawvey pro sese michael f o’donnell for respondent goldberg special_trial_judge this case was heard pursuant to the provisions of sec_7463 of the internal_revenue_code in effect at the time the petition was filed the decision to be entered is not reviewable by any other court and this opinion should not be cited as authority unless otherwise indicated subsequent section references are to the internal_revenue_code in effect for the year in issue respondent determined a deficiency in petitioners’ federal_income_tax of dollar_figure for the taxable_year the issue for decision is whether certain worker’s compensation benefits received by carol j cawvey in lieu of social_security disability benefits are includable in petitioners’ gross_income for taxable_year under sec_86 the adjustments resulting from the disallowance of a portion of the deduction petitioners claimed for medical_expenses are computational and will be resolved by the court’s holding on the social_security_benefits issue background some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference petitioners resided in plainfield illinois on the date the petition was filed in this case robert e cawvey appeared before the court and presented petitioners’ case carol j cawvey petitioner did not appear during most of petitioner worked for aramark a private food servicing company which provided employees to the illinois department of correction’s kitchen services on date petitioner was injured in a work-related accident in november of petitioner applied for and received state of 1petitioners had recently separated before trial however all the parties agreed that robert e cawvey was authorized to represent carol j cawvey’s interest illinois worker’s compensation benefits in petitioner continued to receive worker’s compensation benefits of dollar_figure in petitioner’s attorney advised her to file for social_security disability insurance benefits in april of petitioner applied for social_security_benefits according to form ssa-1099 social_security statement issued by the social_security administration petitioner received social_security_benefits of dollar_figure for taxable_year form ssa-1099 for taxable_year also shows that there was a worker’s compensation offset in the amount of dollar_figure petitioners did not report any social_security_benefits on their joint federal_income_tax return for on date respondent issued to petitioners a notice_of_deficiency that determined petitioners failed to include in gross_income for the taxable_year the amount of dollar_figure as a result of adjustments for taxable social_security_benefits under sec_86 further the determination resulted in computational adjustments causing the disallowance of a portion of the deduction claimed by petitioners for medical_expenses 2respondent calculated this amount a sec_85 percent of the dollar_figure in social_security_benefits for discussion3 as previously stated the issue before the court is whether certain worker’s compensation benefits petitioner received in lieu of social_security disability benefits are includable in petitioners’ gross_income for taxable_year under sec_86 petitioners maintain that since petitioner did not receive an actual payment from the social_security administration during because of the offset of workmen’s compensation benefits received in that year it is unfair to include the offset amount in their income respondent maintains that although petitioners did not receive an actual payment from the social_security administration during they must nevertheless include the offset amount in their income under sec_86 gross_income includes all income from whatever source derived unless specifically excluded sec_61 generally gross_income does not include amounts received under workmen’s compensation acts as compensation_for personal injuries or sickness sec_104 social_security_benefits however are included in gross_income as provided by sec_86 3we decide the issue in this case without regard to the burden_of_proof accordingly we need not decide whether the general_rule of sec_7491 is applicable in this case see 116_tc_438 married taxpayers filing a joint_return whose modified_adjusted_gross_income plus one-half of their social_security_benefits exceeds dollar_figure must include up to a maximum of percent of their social_security_benefits in their gross_income see sec_86 b and c respondent determined that percent of the social_security_benefits petitioner received for is includable in petitioners’ gross_income petitioners do not dispute that petitioner received worker’s compensation benefits in the amount by which her social_security_benefits were offset petitioners however argue that the social_security administration never paid the benefits reported as worker’s compensation offset and thus those amounts should not be included in petitioners’ gross_income sec_86 clearly provides that such offsets are social_security_benefits for purposes of determining gross_income if any social_security_benefit is reduced by reason of the receipt of a benefit under a workmen’s compensation act the term social_security_benefit includes that portion of such benefit received under the workmen’s compensation act which equals such reduction sec_86 was added to the internal_revenue_code by the social_security amendments of publaw_98_21 97_stat_80 the house report states in relevant part social_security_benefits potentially subject_to tax will include any workmen’s compensation whose receipt caused a reduction in social_security disability benefits for example if an individual were entitled to dollar_figure of social_security disability benefits but received only dollar_figure because of the receipt of dollar_figure of workmen’s compensation benefits then for purposes of the provisions taxing social_security_benefits the individual will be considered to have received dollar_figure of social_security_benefits h rept pincite petitioners seem to argue that sec_104 should in effect trump sec_86 however the statutes must be read together sec_104 provides the general_rule that worker’s compensation benefits are not includable in gross_income sec_86 provides the exception to this general_rule and states that the offset amount is included in income in the same manner as a social_security_benefit this has the effect of equalizing the federal tax treatment of social_security_benefits available to various taxpayers who may or may not be eligible to receive worker’s compensation benefits see h rept supra pincite petitioners also argue that the operation of sec_86 is unjust this court is not the proper place for this argument we cannot evaluate the fairness of the law but must apply it as it is written it is up to congress to address questions of fairness and to make improvements to the law metzger trust v commissioner 76_tc_42 affd 693_f2d_459 5th cir we have reviewed and found to be correct respondent’s calculation of the portion of benefits includable in petitioners’ gross_income under sec_86 accordingly we uphold respondent’s determination that petitioners’ gross_income for the taxable_year is increased by dollar_figure as a result of adjustments for taxable social_security_benefits under sec_86 respondent’s computational adjustments to petitioner’s claimed medical_expenses will be decided by our holding on the issue reviewed and adopted as the report of the small_tax_case division decision will be entered for respondent


t c memo united_states tax_court yancy d greer and rita k greer petitioners v commissioner of internal revenue respondent docket no filed date richard l weil for petitioners mary beth calkins for respondent memorandum findings_of_fact and opinion swift judge for respondent determined a deficiency of dollar_figure in petitioners' federal_income_tax unless otherwise indicated all section references are to the internal_revenue_code in effect for the year in issue and all rule references are to the tax_court rules_of_practice and procedure - - the issue for decision is whether certain funds received in connection with a medical malpractice lawsuit should be treated as taxable interest_income or as excludable income from personal injuries all references to petitioner in the singular are to rita greer findings_of_fact some of the facts have been stipulated and are so found at the time the petition was filed petitioners resided in hammond louisiana some time prior to petitioner was diagnosed with a medical disease known as bacterial endocarditis as a result of the disease petitioner sustained devastating injuries to her heart and unfortunately will be subject_to a lifetime of associated medical and physical complications in petitioner filed a medical malpractice claim and a lawsuit against the doctor who she alleged failed properly to diagnose and treat her disease on date petitioner won a jury verdict against her doctor in the amount of dollar_figure for pain and suffering disfigurement and disability and in the amount of dollar_figure for medical_expenses that had been incurred relating to her endocarditis on date a court judgment was entered in favor of petitioner reflecting the total jury award of - - dollar_figure plus interest from the date petitioner filed the malpractice claim in under louisiana law a qualified doctor's maximum personal liability with respect to a medical malpractice award is dollar_figure plus interest see la rev stat ann sec_40 42b west petitioner's doctor carried a private medical insurance_policy the doctor's insurance to cover his personal liability under the above law medical malpractice awards in excess of dollar_figure up to a ceiling of dollar_figure plus interest and additional_amounts for continuing health care costs are paid_by a state-sponsored patient’s compensation fund the state's insurance see la rev stat ann sec_40 42b west la rev stat ann sec_40 44a west la rev stat ann sec_40 44c west on date in partial payment of the above- dollar_figure court judgment petitioner received from the doctor's insurance three checks totaling dollar_figure in the separate amounts of dollar_figure dollar_figure and dollar_figure these checks were not labeled or identified in any way as to whether they represented payments for petitioner's personal injuries interest court costs or otherwise on date petitioner received from the state's insurance a check in the amount of dollar_figure this check was q4e- labeled payment for satisfaction of judgment and by numerical coding reflected on the check the dollar_figure was allocated by the state's insurance dollar_figure to medical_expenses and dollar_figure to interest the total amount petitioner received from both the doctor's insurance and the state's insurance was dollar_figure dollar_figure plus dollar_figure equals dollar_figure on date petitioner signed an agreement the agreement which in exchange for payment of the dollar_figure from the doctor's insurance released petitioner's doctor and the doctor's insurance from any further liability with respect to the medical treatment petitioner received relating to bacterial endocarditis in approximately february of a document entitled satisfaction of judgment the satisfaction of judgment document was signed by petitioner's lawyers in which it was represented that by payment of the dollar_figure petitioner's doctor and the doctor's insurance satisfied their portion of the above court judgment and that by payment of the dollar_figure the state's insurance satisfied its portion of the court judgment except for petitioner's future medical costs for petitioners timely filed a joint federal_income_tax return on which petitioners excluded from reported gross - - income the total dollar_figure received from the doctor's insurance and from the state's insurance on audit respondent determined that dollar_figure of the total dollar_figure petitioner received constituted interest_income and should be included in petitioners' gross_income opinion under sec_61 gross_income includes all income from whatever source derived unless otherwise excluded by the internal_revenue_code under sec_61 interest_income is specifically included in the computation of gross_income under sec_104 however damages received relating to personal injuries are excluded from gross_income sec_104 states in relevant part as follows a in general -- except in the case of amounts attributable to and not in excess of deductions allowed under sec_213 relating to medical etc expenses for any prior taxable_year gross_income does not include-- the amount of any damages received whether by suit or agreement and whether as lump sums or as periodic_payments on account of personal injuries or sickness as is noted interest on funds relating to personal injuries is not mentioned in the exclusionary language of sec_104 generally exclusions from gross_income are to be narrowly construed see 336_us_28 - - 48_f3d_894 5th cir 100_tc_124 affd without published opinion 25_f3d_1048 6th cir courts have consistently held that prejudgment_interest received on funds awarded for personal injuries does not qualify for the exclusion from income under sec_104 see eg 154_f3d_1 1st cir affg tcmemo_1997_528 94_tc_189 under louisiana law in order that a plaintiff might be made whole after an injury courts are required to award prejudgment_interest on personal injury damages see la rev stat ann sec west lewis v macke bldg serv inc so 2d la ct app davis v le blanc so 2d la ct app respondent asserts that dollar_figure of the total dollar_figure petitioner received in connection with her personal injuries dollar_figure from the doctor's insurance and dollar_figure from the state's insurance constitutes interest_income under sec_61 and is not excludable from income under sec_104 a petitioners assert that the agreement and the satisfaction of judgment documents are evidence of a separate settlement under which the entire dollar_figure petitioner received should be treated - as compensation_for her personal injuries and should be excluded from gross_income under sec_104 petitioners contend that any intimation of interest from the checks or otherwise reflects only internal bookkeeping utilized by the doctor's insurance and the state's insurance on february and approximately weeks after the date court judgment was entered the doctor's insurance and the state's insurance issued to petitioner the four checks with regard to the three checks issued to petitioner by the doctor's insurance according to testimony at trial and correspondence in evidence the dollar_figure check constitutes the dollar_figure limit of liability on damages under louisiana law the dollar_figure check constitutes court costs and the dollar_figure check constitutes interest we conclude that the check for dollar_figure constitutes interest with regard to the dollar_figure check issued to petitioner by the state's insurance the numerical code and other evidence at trial establish that dollar_figure thereof constitutes interest we so hold petitioners’ argument that a separate settlement existed between petitioner the doctor's insurance and the state's insurance disparate from the court judgment entered in petitioner's favor is not supported by the evidence the three checks received from the doctor's insurance total dollar_figure the --- - exact total amount reflected in the agreement both the satisfaction of judgment document and the dollar_figure check issued by the state's insurance specifically reflect that payment was in satisfaction of the court judgment the agreement and the satisfaction of judgment documents simply acknowledge that the doctor the doctor's insurance and the state's insurance satisfied their respective financial liabilities under the dollar_figure court judgment because louisiana courts are required to award prejudgment_interest on damages awarded relating to personal injuries petitioners argue that for income_tax purposes compulsory prejudgment_interest should be eligible for exclusion under sec_104 interest however is separate and distinct from damages and generally is awarded to compensate for delay in payment see rozpad v commissioner f 3d pincite although petitioner under louisiana law may have received prejudgment_interest automatically as a result of her medical malpractice claim under the internal_revenue_code that income is nevertheless taxable as interest_income although the court judgment amount of dollar_figure clearly reflects income from personal injuries within the scope of - sec_104 the additional dollar_figure petitioner received constitutes interest_income and must be included in petitioners' gross_income under sec_61 to reflect the foregoing decision will be entered under rule


id office uilc cca_2009100913335624 --------------- 7508a number release date from --------------- sent friday october pm to -------------------------------------------------------------- cc ----------------- subject re ------ income_tax return --------- our long-standing position is that the period of postponement does not change the actual due_date sec_6513 which pertains to early filed returns looks to for the prescribed date of filing a return filed during the postponement period if that filing is after april for individual taxpayers is not a 'early filed' return i have been told by -------- ---------------that this is a position that has been taken since at least ----------------------


t c memo united_states tax_court cameron w bommer revocable_trust ronald bommer trustee petitioner v commissioner of internal revenue respondent estate of cameron w bommer deceased marcella bommer executrix ronald j bommer residuary trustee trustee and executor cameron m bommer executor ronald bommer ii executor kelly long executrix petitioner v commissioner of internal revenue respondent docket nos filed date marc w rubin burgess l doan janet l houston and michael r schmidt for petitioners robin l herrell and matthew j fritz for respondent memorandum findings_of_fact and opinion ruwe judge in docket no respondent determined a deficiency in petitioner cameron w bommer revocable trust's generation-skipping_transfer_tax in the amount of dollar_figure in docket no respondent determined a deficiency in petitioner estate of cameron w bommer's federal estate_tax in the amount of dollar_figure and generation-skipping_transfer_tax in the amount of dollar_figure the issue before us is the effect if any of a restrictive stock agreement on the value of certain stock in camvic corp that is includable in the estate of cameron w bommer decedent we severed this issue for trial and opinion the remaining issues if not settled will be decided in subsequent proceedings unless otherwise indicated all section references are to the internal_revenue_code as in effect for the date of decedent's death and all rule references are to the tax_court rules_of_practice and procedure findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts is incorporated herein by this reference decedent was born date and died testate on date decedent was survived by his wife marcella bommer marcella his only child ronald j bommer ronald and ronald's three children cameron m bommer cameron m kelly long and ronald bommer ii ronald ii decedent and marcella were married in the early 1930's and they remained married until decedent's death on date marcella was appointed the executrix of decedent's_estate on date marcella filed a united_states estate and generation-skipping_transfer_tax return form_706 on behalf of the estate on date decedent's_estate was closed final distributions were made from the estate and marcella was discharged as executrix camvic corp camvic corp camvic is a closely held company that was incorporated in the state of ohio on date decedent and victor fay started camvic with total capital contributions of 1at the time the petitions were filed in these cases marcella ronald and cameron m bommer and kelly long all resided in cincinnati ohio while ronald ii resided in south orange new jersey 2the business office for decedent's_estate was in cincinnati ohio at all times during the pendency of the estate the business address of the cameron w bommer revocable_trust is also in cincinnati ohio dollar_figure of the five voting shares of camvic issued at its inception two shares were held by decedent one share was held by marcella and two shares were held by victor fay at the time of decedent's death camvic owned and managed real_property in ohio indiana and florida see infra p ronald who began working at camvic in drew the plans for and supervised the construction of several of camvic's properties ronald was also responsible for the management and maintenance of the properties as of date the ownership of camvic was as follows individual shares owned decedent marcella victor fay on this date victor fay sold his entire_interest in camvic to the corporation for dollar_figure and was replaced by ronald on the board_of directors on date camvic was merged with two other corporations owned by the bommer family--bommer road golf course inc brgc and bommer builders inc camvic was the 3decedent was initially employed in the building trades for several years prior to decedent and victor fay operated a partnership known as bommer builders 4brgc was incorporated on date the record contains no evidence with respect to the amount of any capital contributions to brgc brgc began operations in with a continued surviving corporation in the merger the value of camvic stock used to compute the exchange ratio for the merger was dollar_figure per share on date decedent created the cameron w bommer trust cwb trust to which he transferred his entire_interest in camvic although revocable during decedent's lifetime the trust was to become irrevocable upon his death decedent reserved the right to vote his camvic stock as well as to preclude its sale or transfer during his lifetime kenneth hughes was the sole trustee of the cwb trust from its inception through date when he was replaced by ronald ronald remained sole trustee through the date of decedent's death continued driving range a par three nine-hole golf course a pro shop and a snack bar were added later camvic continued to operate the facilities until the end of 5bommer builders inc was incorporated on date decedent and victor fay owned and shares respectively these shares were issued in consideration for the transfer of all assets and the assumption of all liabilities of bommer builders partnership the sale documents listed the net value of the assets of bommer builders partnership at the time of the transfer at dollar_figure 6the trust was amended or revised on date date date date date and date the documents clearly indicate on their face that they are amendments and they also state the dates upon which they were executed 7subsequent to decedent's death and pursuant to the terms of the cwb trust three new trusts were created the credit_shelter_trust the exempt qtip_trust and the qtip_trust until the time of decedent's death camvic stock was the only asset held by the trust during through decedent filed gift_tax returns or amended gift_tax returns on the dates listed below which reflected the following gifts of camvic stock as well as their per-share value date of date of gift no of recipient per-share gift_tax_return shares of gift value ronald dollar_figure ronald ii dollar_figure cameron m dollar_figure kelly long dollar_figure ronald dollar_figure ronald ii dollar_figure cameron m dollar_figure kelly long dollar_figure ronald dollar_figure ronald ii dollar_figure cameron m dollar_figure kelly long dollar_figure ronald dollar_figure ronald ii dollar_figure cameron m dollar_figure kelly long dollar_figure ronald dollar_figure ronald served as custodian for all gifts to his children who were minors at that time the above gifts left the ownership of camvic's stock as of date as follows shareholder shares owned percentage owned cwb trust marcella ronald cameron m ronald ii kelly long following decedent's gifts of date the ownership of camvic's stock remained unchanged until decedent's death on date camvic's subsidiaries a camron corp camron corp camron was incorporated on date of the big_number shares issued camvic held joseph klawitter and joseph westerhaus each held and edwin fay held the shareholders paid dollar_figure per share at the time of decedent's death camron owned several real properties in ohio and missouri see infra p on date a stock retirement agreement was executed between camron and messrs klawitter westerhaus and fay the agreement stated that the corporation will herein agree to purchase the shares of the said stock of any of the stockholders in the event of his death subject_to all of the terms and provisions hereof camron would purchase the shares of a stockholder upon his death for dollar_figure per share the agreement also provided that in the event a shareholder desired to sell his shares during his lifetime he was first required to offer the shares to the corporation at the stated price per share the agreement provided for periodic reevaluation of the stock price and the price per share was in fact modified on several occasions the final modification was executed on date and increased the purchase_price to dollar_figure per share camvic the majority shareholder was not a party to the agreement on date messrs westerhaus and klawitter sold their shares to camron for a price of dollar_figure per share which was in excess of the purchase_price set forth in the modified agreement following the sale camvic held shares of camron and edwin fay held shares on date camvic sold to edwin fay shares of camron stock for dollar_figure per share following the sale camvic held shares of camron dollar_figure percent and edwin fay held shares dollar_figure percent on this same date camron and edwin fay entered into an agreement whereby edwin fay agreed that if he desired to sell his shares he would offer them first to camron and or the other shareholders b ferguson enterprises inc ferguson enterprises inc ferguson was incorporated on date upon incorporation its stock was held as follows shareholder no of shares edwin fay joseph westerhau sec_3 joseph klawitter marcella bommer ronald bommer in date camron purchased shares of ferguson stock for dollar_figure and the ownership of ferguson's stock remained unchanged through on date messrs klawitter westerhaus and fay executed a stock retirement agreement with ferguson the terms of which were substantially_similar to those contained in camron's stock retirement agreement on date messrs westerhaus and klawitter each sold their shares in ferguson to the corporation at a price of dollar_figure per share which was in excess of the price set forth in the stock retirement agreement the camvic buy-sell_agreement on or after date camvic and its shareholders executed a buy-sell_agreement which provided in pertinent part as follows whereas the stockholders believe that certain restrictions upon the transfer of all the shares of the corporation as hereinafter provided will serve in the best interests of the stockholders no stockholder will sell exchange or otherwise dispose_of by gift or otherwise except as hereinafter provided any of the shares of the corporation he now 8although executed at this time the buy-sell_agreement was dated date owns or may hereafter acquire nor encumber pledge or hypothecate any of said shares in the event a stockholder wishes to sell his shares of the corporation or any part thereof he must first offer to sell such shares to the corporation at the price and on the terms hereinafter set out in item and hereof and he shall give notice to corporation of his desire to sell and the corporation shall have fourteen days after receipt of such notice within which to exercise its option upon failure of the corporation to exercise such option within such time then the other stockholders shall have and are hereby given their right and option for seven days thereafter to purchase all the shares offered for sale by the selling stockholder in the proportion of their stockholdings at the price and on the terms hereinafter set forth in item sec_3 and hereof if neither the corporation nor the other stockholders exercise the option hereinabove given within the time specified then said option shall terminate and the party desiring to sell shall be free to sell his shares of the corporation to others it is understood and agreed that unless all of the shares which the selling stockholder has offered for sale are purchased by either the corporation or the other stockholders hereinafter provided then the aforesaid option even if exercised shall be null and void and the stockholder shall be free to sell his said shares to others the purchase_price of the shares of the corporation to be paid_by the corporation or the stockholder in the event of any sale as provided for in item hereof and as hereinafter set forth shall be dollar_figure per share in the event of a sale the purchase_price of said shares shall be paid with a ten per cent downpayment within sixty days of the acceptance of the offer to purchase and the remaining balance shall be payable in ten annual installments of equal amounts on the anniversary date of the downpayment the remaining balance shall bear interest at the rate of five per cent per annum the purchasing_corporation or stockholder as the case may be may pre-pay the balance at any time in the event of the death of a stockholder he agrees to offer his shares of stock to the corporation or to the stockholders and said corporation and other stockholders shall have the option to purchase his shares under the terms and conditions as set forth in item sec_2 and above this agreement may be amended or altered by the written consent of the holder of at least seventy- five percent of the issued and outstanding shares of the corporation at the time the buy-sell_agreement was executed decedent held a beneficial_interest through the cwb trust in percent of the outstanding_stock in camvic and had retained the right to vote those shares in addition ronald owned percent of the outstanding_stock in camvic marcella owned percent and ronald's three children each owned percent the agreement did not provide for periodic revaluation of camvic's stock a the computation of camvic's value for purposes of the buy-sell_agreement the computation of the value of camvic stock for purposes of the buy-sell_agreement was prepared by kenneth hughes an attorney and tax adviser to the bommer family and its businesses mr hughes and his law firm santen santen hughes served as legal counsel to all parties to the buy-sell_agreement the parties have stipulated that mr hughes computed camvic's value as follows 9mr hughes died in date assets value cash equivalents notes accounts_receivable dollar_figure inventory prepaids c v --insurance big_number camron stock 1big_number equipment big_number unimproved land big_number dina terrace dina tower land at book_value big_number improvements big_number total dina terrace dina tower big_number total assets big_number less liabilities big_number net asset value big_number shares outstanding per-share value dollar_figure 1on date camvic held shares percent of camron for purposes of the buy-sell_agreement camron's value was calculated as follows assets value cash equivalents notes accounts_receivable dollar_figure inventory prepaids c v --insurance big_number ferguson stock big_number equipment big_number mobile home park big_number hillenbrand nursing home big_number land improvements big_number total assets big_number less liabilities big_number net asset value big_number camvic's ownership camvic's equity in camron dollar_figure despite the above valuation both parties agree that ferguson's stock was virtually worthless at this time 2dina terrace and dina tower are residential apartment complexes for purposes of his valuation mr hughes computed the value of dina terrace and dina tower excluding the land by increasing rents for by a projected 6-percent inflation to project rents of dollar_figure adding laundry income of dollar_figure deducting operating_expenses of dollar_figure and capitalizing at a 12-percent rate the projected net_earnings for of dollar_figure the computation was made during a meeting of mr hughes decedent and ronald on january dollar_figure mr hughes completed his computation in day neither the parties to the buy-sell_agreement nor mr hughes obtained a professional business valuation of camvic or a professional appraisal with respect to the value of any of the properties owned by camvic or its subsidiaries prior to acceptance of the dollar_figure per-share price set forth in the agreementdollar_figure b the revised agreement in or around date decedent camvic and its minority shareholders entered into a revised version of the buy-sell_agreement revised agreement attorneys kenneth hughes and gary hoffman and their law firm santen santen hughes served as legal counsel to all parties to the revised agreement the only significant modification made in the revised agreement was that paragraph was changed with respect to the percentage of stock ownership necessary to amend the terms of the agreement the revised agreement provided that the written 10none of camvic's other shareholders participated in this meeting 11the only professional appraisal used in the computation was an appraisal of an unimproved parcel of land owned by camvic which had been appraised at dollar_figure approximately years earlier on date consent of the holders of at least seven-eighths percent of camvic's stock was necessary to amend the terms of the buy- sell agreementdollar_figure on two pages of contemporaneous handwritten notes relating to the revision of the buy-sell_agreement an attorney with santen santen hughes recorded the following on page addendum para changed control to rather than purpose is to set estate_tax_value on page purpose we want dollar_figurek sh value death the revised agreement did not permit decedent to amend its terms unilaterally nevertheless it permitted him to amend them with his wife marcella's consentdollar_figure moreover if marcella predeceased him decedent could have acquired the requisite percentage of stock through the purchase option and then would 12the original buy-sell_agreement permitted the holder of percent of camvic stock to amend the terms of the agreement 13these quotes are excerpts the other portions of the notations deal with the bommer family wills and trusts and the camvic buy-sell_agreement 14the record indicates that marcella did not take an active role in camvic's affairs have been able to amend the terms of the revised agreement unilaterallydollar_figure the revised agreement did not change the dollar_figure per- share purchase_price for the camvic stock nor did it contain a provision requiring reevaluation of the stock price the parties did not negotiate with respect to the price per share before entering into the revised agreement the revised agreement was titled buy-sell_agreement the same as the agreement executed in it provided at the outset that it was made and entered into as of the 2nd day of january in addition ronald signed the revised agreement as the custodian for each of his children although he was no longer the custodian of cameron m or ronald ii in and he signed the agreement as the secretary of camvic his position in date in however ronald was camvic's corporate president similarly decedent signed the revised agreement as president of camvic--his position in 1975--even though decedent was corporate secretary in dollar_figure 15decedent would have had percent of camvic's stock had either he or camvic exercised the right to purchase marcella's stock 16none of decedent's grandchildren had signed the original buy-sell_agreement however his grandchildren's signatures appear on the revised agreement the grandchildren did not date their signatures on the revised agreement rather ronald inserted the dates cameron m 's signature is dated date the date of his 18th birthday which fell approximately years before the execution of the revised agreement ronald ii's continued camvic's and camron's real_property holdings camvic owned the following real properties during the time periods relevant to this case property property owned in owned in owned hamilton county hamilton county property date date in tax valuation1 tax valuation dina terrace cincinnati ohio y y y dollar_figure dollar_figure dina tower cincinnati ohio y y y big_number big_number acres boudinot ave cincinnati ohio2 y y y big_number big_number condominium in gulf's harbor's condominiums new port richey florida3 n y n -- -- victory tower cincinnati ohio4 n y n -- 5big_number commercial properties jacksonville florida n n y -- -- apartments cincinnati ohio n n y -- -- apartments batesville indiana n n y -- -- commercial property heath ohio n n y -- -- 1the record contains valuations only for properties located in hamilton county ohio hamilton county computes the assessed valuation of real_property by multiplying the county's estimate of market_value by percent 2on date camvic made a partial sale of the boudinot land for dollar_figure it had acquired the entire property on date for dollar_figure continued signature is dated date the date of his 18th birthday which fell approximately years before the execution of the revised agreement 3camvic purchased this condominium in for dollar_figure and sold it in date for dollar_figure 4victory tower was acquired on date for dollar_figure and sold on date for dollar_figure 5camvic successfully protested victory tower's hamilton county tax valuation and the county revised its assessed tax valuation from dollar_figure to dollar_figure during these same years camron owned the following real properties property property owned in owned in owned hamilton county hamilton county property date date in tax valuation tax valuation hillenbrand nursing ctr cincinnati ohio y y y dollar_figure dollar_figure martin mobile park home cincinnati ohio y y y unknown unknown apartments lakeview cincinnati ohio1 n y y -- big_number commercial property middletown ohio n n y -- -- commercial property st louis missouri n n y -- -- 1camron acquired four apartment buildings on date for dollar_figure and sold one of these buildings on date for dollar_figure decedent's death and subsequent events decedent died on date the parties have stipulated that shares of camvic stock which he beneficially owned through the cwb trust were includable in his gross_estate pursuant to sec_2036 on date the following transfers of camvic stock occurred transferor transferee no of shares payment method cwb trust estate of cameron w bommer cwb trust credit_shelter_trust cwb trust exempt qtip_trust cwb trust qtip_trust dollar_figure estate of cameron w camvic cash bommer credit_shelter_trust camvic cash 1transferred pursuant to terms of the trust rather than sales on date the following transfers of camvic stock took place transferor transferee no of shares payment method credit_shelter_trust ronald cash note credit_shelter_trust cameron m gc trust cash note credit_shelter_trust kelly long gc trust cash note credit_shelter_trust ronald ii gc trust cash note exempt qtip_trust ronald ii gc trust cash note qtip_trust camvic cash note marcella camvic cash pursuant to the terms of the buy-sell_agreement the transfer price was dollar_figure per share payments which consisted of a combination of cash and a promissory note were made pursuant to the following terms a 10-percent cash downpayment and a promissory note to pay annual installments with the unpaid balance accruing interest at a 5-percent annual rate 17in addition kelly long transferred her shares of camvic to the kelly long gc trust cameron m transferred hi sec_1 shares to the cameron m gc trust and ronald ii transferred hi sec_1 shares to the ronald ii gc trust all three transfers were made on date subsequent to these transfers there were outstanding shares of camvic stock which were owned as follows shareholder no of shares percentage held ronald cameron m gc trust kelly long gc trust ronald ii gc trust respondent refused to accept petitioners' dollar_figure per-share valuation of decedent's beneficial_interest in shares of camvic stock as reported on schedule g of the federal estate_tax_return in the notices of deficiency in these cases respondent determined that the fair_market_value of the shares of camvic stock includable in decedent's gross_estate was dollar_figure per share consequently respondent increased decedent's gross_estate in the amount of dollar_figure opinion the only issue we address in this opinion is the effect if any of camvic's restrictive stock agreement on the value of the camvic stock includable in decedent's gross_estate pursuant to sec_2036 the gross_estate includes the value of all property to the extent of the decedent's interest therein at the time of his death estate of smith v commissioner t c ___ ___ slip op pincite the standard for valuation is fair_market_value which is defined as 'the price at which the property would change hands between a willing buyer and a willing seller neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts ' 411_us_546 quoting sec_20_2031-1 estate_tax regs the determination of fair_market_value is a question of fact 94_tc_193 88_tc_38 if the relevant property is stock that is not listed on any exchange and cannot be valued with reference to bid and asked prices or historical sales prices the value of listed corporations engaged in the same or a similar line_of_business should be considered sec_2031 the value of corporate stock may be limited for federal estate_tax purposes as a result of an enforceable buy-sell_agreement or option contract which fixes the price at which the stock may be offered for sale to the remaining shareholders see eg 674_f2d_1207 8th cir 194_f2d_396 2d cir 82_f2d_166 2d cir 57_f2d_682 2d cir estate of gloeckner v commissioner tcmemo_1996_148 estate of lauder v commissioner tcmemo_1992_ rudolph v united_states aftr 2d ustc par big_number s d ind courts have developed a set of requirements for determining whether the price set forth in a restrictive agreement controls for purposes of the federal estate_tax in estate of lauder v commissioner supra we summarized these requirements 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 citations omitted see also st louis county bank v united_states supra pincite estate of gloeckner v commissioner supra we will first analyze the original buy-sell_agreement under the standard set forth in estate of lauder v commissioner supra respondent concedes that the buy-sell_agreement established a fixed and determinable price for the stock thus we shall focus on the remaining three requirements the first requirement is whether decedent was bound by the terms of the original buy-sell_agreement executed in date petitioners maintain that it was not intended that decedent would have the unilateral ability to amend the terms of the buy-sell_agreement petitioners argue that the original agreement controls since in their view the purpose of the revised agreement was simply to correct a scrivener's error ie the percentage of stock ownership necessary to alter the terms of the agreement the parties agree that the only significant change produced by the revised agreement was the percentage of stock ownership necessary to change the terms of the agreement petitioners argue that the original buy-sell_agreement was a binding contract enforceable under ohio state law respondent maintains that sec_20_2031-2 estate_tax regs sets forth the applicable standard for determining whether a restrictive stock agreement is controlling for estate_tax purposes this regulation provides that little weight will be accorded a price contained in an option or contract under which the decedent is free to dispose_of the underlying securities at any price he chooses during his lifetime sec_20_2031-2 estate_tax regs see also 3_tc_525 2_tc_1160 affd sub nom 148_f2d_285 9th cir respondent asserts that the original buy-sell_agreement was not binding on decedent during his lifetime because he had the power to unilaterally alter its terms we agree the original buy-sell_agreement executed in date expressly provided that this agreement may be amended or altered by the written consent of the holder of at least seventy-five percent of the issued and outstanding shares of the corporation decedent owned a beneficial_interest via the cwb trust in percent of camvic's outstanding_stock on the date the buy-sell_agreement was executed and for the remainder of his life this beneficial_interest included the right to vote the shares thus the plain wording of the buy-sell_agreement leaves no question as to the unilateral authority that decedent possessed decedent singlehandedly could have altered the price-per-share clause as well as any other terms of the agreement ronald testified that the parties to the original agreement never intended that decedent should have the unilateral right to amend and that in years later ronald discovered this error in the agreement we cannot accept this explanation the evidence indicates that decedent was a man who liked to control his affairs in he wa sec_62 years old and in good health the language of the agreement is clear it was signed in by decedent ronald and kenneth hughes mr hughes prepared the agreement and was also the trustee of the cwb trust we have no doubt that decedent ronald and the attorneys at santen santen hughes recognized that the agreement gave decedent the authority to amend the agreement under these circumstances we need not and do not accept ronald's self-serving and uncorroborated testimony that the change was simply a correction of a scrivener's error in the buy-sell_agreement see 87_tc_74 petitioners assert that the agreement is valid for estate_tax purposes even if decedent had the power to change its terms petitioners contend that our decision in 69_tc_32 supports their position in estate of bischoff v commissioner supra pincite we found that a partnership's restrictive buy-sell provisions were not merely a substitute for a testamentary_disposition to the natural objects of each decedent's bounty in doing so we rejected the commissioner's argument that the partnership_agreement could have been amended to circumvent the restrictive buy-sell provisions petitioners maintain that our observation in a footnote in estate of bischoff v commissioner supra pincite n that the provisions of the agreement were adhered to following the deaths of several partners including the decedents indicates that an agreement will be respected for estate_tax purposes so long as the parties adhere to its terms we disagree in estate of bischoff v commissioner supra pincite the two decedents who were husband and wife owned partnership interests of only percent and percent respectively at their deathsdollar_figure in addition although one of the decedents was the sister of another of the partners we noted that respondent does not contend that the bischoff and brunckhorst families were the natural objects of each other's bounty moreover there is no evidence which would support such a contention id pincite n in the instant case in contrast the terms of the original buy-sell_agreement expressly provided that decedent possessed the authority to alter the agreement's terms at any time and the natural objects of decedent's bounty were the other shareholders of camvic stock 18since the partnership generally retired each partner's interest upon his withdrawal or death the interests owned by the decedents at their deaths were presumably their largest see 69_tc_32 petitioners argue that decedent would have breached his fiduciary duty to the other camvic shareholders if he had unilaterally altered the provisions of the agreement to his advantage and the minority shareholders' detriment as a result petitioners contend that the agreement despite its literal terms was nevertheless binding on decedent during his lifetime petitioners' argument is unpersuasive as it is certainly not a breach of any fiduciary duty for a majority shareholder to sell his stock at the highest price possible the original buy-sell_agreement provided decedent with the ability to amend the agreement in order to reflect a contemporary per-share price at which the corporation would purchase a shareholder's stock upon his withdrawal or at death the next issue is whether the terms of the revised agreement executed in were binding on decedent pursuant to the revised agreement the holders of at least percent of camvic stock could alter the terms of the agreement while decedent held a beneficial_interest in only percent of the corporation's stock his wife marcella owned an additional percent marcella did not actively participate in the affairs of the corporation with marcella's interest decedent would have held the requisite amount of stock ownership to alter the agreement decedent also could have gained the required_percentage if marcella had predeceased himdollar_figure we 19had marcella died her stock would also have been subject continued note that decedent's son ronald and ronald's three children ie those shareholders with interests presumably adverse to the interests of an older majority shareholder never had the ability by themselves to prevent decedent from amending the revised agreement we view the revised agreement as an attempt to remedy an estate_tax problem while at the same time allowing decedent to retain the effective ability to alter the terms of the revised agreement for the foregoing reasons we hold that neither the original buy-sell_agreement nor the revised agreement was binding on decedent during his lifetime nevertheless even assuming that either agreement is construed as binding petitioners still would not prevail because as explained later we believe that the buy-sell_agreement and revised agreement were testamentary devices to transfer decedent's interest in camvic's stock to the natural objects of his bounty sec_20_2031-2 estate_tax regs provides in relevant part even if the decedent is not free to dispose_of the underlying securities at other than the option or contract_price such price will be disregarded in determining the value of the securities unless it is determined under the circumstances of the particular case that the agreement represents a bona_fide business arrangement and not a device to pass the decedent's shares to the natural continued to the buy-sell_agreement had either camvic or decedent through the cwb trust exercised the option rights to purchase marcella's shares decedent would have controlled over percent of the shares objects of his bounty for less than an adequate_and_full_consideration in money_or_money's_worth as the language indicates for the price set forth in the agreement to control the agreement must serve a bona_fide business_purpose and also must not constitute a testamentary device estate of gloeckner v commissioner tcmemo_1996_148 estate of lauder v commissioner tcmemo_1992_736 since the issues are interrelated we will consider them in tandem legitimate business purposes are often inextricably mixed with testamentary objectives where as here the parties to a restrictive stock agreement are all members of the same immediate_family estate of lauder v commissioner supra see also bittker lokken federal taxation of income estates and gifts par pincite to 2d ed accordingly intrafamily agreements restricting the transfer of stock in a closely_held_corporation are subject_to greater scrutiny than that given to similar agreements between unrelated parties 828_f2d_177 3d cir 82_tc_239 affd without published opinion 786_f2d_1174 9th cir estate of lauder v commissioner supra petitioners raise several business purposes which they contend were furthered by the buy-sell_agreement first they maintain that the agreement was intended to preserve family control within the group consisting of the camvic shareholders the preservation of family ownership and control of a corporation has been recognized in certain cases as a legitimate business_purpose see estate of bischoff v commissioner t c pincite 31_tc_181 estate of lauder v commissioner supra petitioners also assert that the buy-sell_agreement was intended to prevent ronald from leaving camvic respondent contends that the evidence fails to demonstrate that ronald was uniquely qualified for any of his responsibilities at camvic such that there was a bona_fide business need to retain him ronald began working for camvic in ronald testified that he supervised the construction of dina terrace and he drew the plans for and supervised the construction of dina tower when these apartments were completed ronald managed the properties for camvic moreover ronald testified that he and decedent had conflicting business philosophies ronald stated that he believed camvic should build and manage properties whereas decedent had a build and sell philosophy ronald further testified that decedent had previously made impulsive business decisions which ronald believed were to the detriment of camvic for instance ronald testified that decedent had constructed a golf course on land unsuitable for that purpose purchased a mobile home park in a flood plain at a price above the land's appraised value and insisted on purchasing nearly acres of land for a car wash when a half acre was sufficient ronald stated that these concerns prompted him to approach mr hughes who in turn suggested the efficacy of a restrictive stock agreement following our review of the record we find that ronald's retention played some part in the creation of the buy-sell_agreement at the time the agreement was created ronald was relatively young and had already worked at camvic for over years during that time he had gained solid experience through his work with camvic's properties ronald also had concerns with respect to his security in the business under these circumstances we conclude that it was reasonable for ronald to attempt to solidify his future at camvic through the creation of a restrictive stock agreementdollar_figure we find that there was some business_purpose for entering into the buy-sell_agreement and the revised agreement in order to meet the test set forth in sec_20_2031-2 estate_tax regs and applied in estate of lauder v commissioner supra petitioners must also demonstrate that the agreement was not intended as a device to pass decedent's interest in camvic to the natural objects of his bounty for less than an adequate_and_full_consideration in money_or_money's_worth petitioners have failed to do this for the reasons set forth below we conclude that an inference may fairly be drawn that the buy-sell_agreement and the 20nevertheless we note that nothing in the buy-sell_agreement prevented ronald from leaving camvic or decedent from continuing to make impulsive business decisions decedent had the controlling_interest in camvic and could have caused camvic to buy or sell properties revised agreement were designed to serve such a testamentary purpose first the purchase_price set forth in the agreements was fixed at dollar_figure per share it was not subject_to any periodic reevaluation in order to account for an increase in camvic's value we find it unrealistic to assume that decedent as the majority shareholder would have negotiated a fixed price for the agreements if he had been bargaining with unrelated partiesdollar_figure petitioners argue that the buy-sell_agreement was not a testamentary device because real_estate values fluctuate and decedent had personally experienced these fluctuations in his own business we fail to see how concern about the fluctuation in the value of real_estate or camvic's shares could have been a nontestamentary purpose for decedent to have agreed to a fixed price per share the buy-sell_agreement granted a purchase option it did 21we note that decedent was a general_partner in the oak hills investment co the partnership_agreement dated date contained a similar restrictive transfer provision which generally required the partners--if they desired to sell their interests in the partnership--to offer their interests to the partnership and then to the other partners pro_rata however unlike the provision in camvic's buy-sell_agreement the partnership agreement's provision provided the purchase_price for said sale shall be the transferring partner's pro-rata share of the appraised value of the net assets of the partnership which shall be equal to that percentage of ownership of the withdrawing partner times the fair_market_value of the assets owned by the partnership at the time notice is given minus all debts and liabilities of the partnership not require camvic or the other shareholders to buy the shares if tendered if the value of the shares declined below dollar_figure the rights to buy shares pursuant to the agreement would not be exercised therefore neither decedent nor his estate was protected in the event of declining values on the other hand if the value of real_estate in general and camvic in particular rose neither decedent nor his estate could sell the controlling_interest in camvic for more than dollar_figure the only beneficiaries of an increase in the value of camvic's stock were the natural objects of decedent's bounty in addition to the fixed price per share the generous payment terms of the buy-sell_agreement and the revised agreement are a further indication of their testamentary nature under the agreements payments could be made pursuant to the following terms a 10-percent cash downpayment and a promissory note to pay annual installments with the unpaid balance accruing interest at a percent annual rate petitioners' own expert witness stated that in the first half of banks were not granting loans to borrowers who had less than an aaa credit history and the interest rate on business loans in excess of dollar_figure million during this period was dollar_figure percent he also stated that in the prime interest rate exceeded percent based on these figures purchasers of camvic under the agreements enjoyed the benefit of an interest rate that was less than one-half of the rate for and less than one-fourth of the rate for we are also unpersuaded that decedent was anticipating a decline in value there is no credible_evidence suggesting that camvic's value was declining at the time the original buy-sell_agreement was executed in or in indeed valuations of camvic stock made between and indicate that camvic's value was actually increasing during this time on a gift_tax_return filed date decedent reported the value of shares of camvic stock that he had gifted to ronald at dollar_figure per share when camvic later merged on date with two other corporations owned by the bommer family the value of camvic's stock for purposes of computing the exchange ratio for the merger was dollar_figure per share in addition between and decedent made several gifts of camvic stock to ronald and his grandchildren each gift was valued for gift_tax purposes at dollar_figure per sharedollar_figure second an inference of testamentary device can be drawn from the manner in which the parties selected the dollar_figure price per share for the purchase of camvic stock decedent was an experienced businessman yet he failed to obtain a professional appraisal of camvic its subsidiaries or its real properties instead decedent did nothing more than consult with his attorney mr hughes decedent and ronald had one meeting with mr hughes who completed his computation upon which the above price per share was based in 22with respect to the period from until approximately date when the revised agreement was executed camvic's increasing value is not disputed by petitioners or their expert witness day no bona_fide negotiations occurred with respect to the stock price as mr hughes and his law firm represented all parties to the buy-sell_agreement instead the parties selected a value of dollar_figure per share a price which was approximately dollar_figure less than the value decedent had reported for every gift of camvic stock he made between and in estate of lauder v commissioner tcmemo_1992_736 which was similar in this respect we found that a restrictive stock agreement was intended as a substitute for a testamentary_disposition in estate of lauder we explained we are most concerned with the arbitrary manner in which leonard an experienced businessman adopted the adjusted book_value formula for determining the purchase_price of the stock under the agreements leonard admitted that he arrived at the formula without a formal appraisal and without considering the specific trading prices of comparable companies nor does it appear that leonard obtained any significant professional advice in selecting the formula price leonard settled on the book_value formula himself after consulting with arnold m ganz a close family financial adviser now deceased no revaluation of camvic stock occurred in prior to execution of the revised agreement rather the parties to the revised agreement simply reiterated the dollar_figure price notes of an attorney with santen santen hughes in indicate that the 23in contrast we note that camron's and ferguson's stock retirement agreements provided for periodic reevaluation of the stock price and the majority shareholders of these corporations ie camvic and camron respectively were not parties to these agreements purpose of the revised agreement was to set the estate_tax_value on brief petitioners argue that these notes provide no insight into decedent's intent as the attorney who made the notes never met with decedent personally we disagree petitioners have stipulated that the attorney's notes relate to the revision of the buy- sell agreement mr hughes and his law firm santen santen hughes were decedent's longtime attorneys and they represented all parties to the original buy-sell_agreement in as well as the revised agreement in the santen santen hughes attorneys served as decedent's advisers in this matter and the notes made by an attorney with the firm at that time were business records of the firmdollar_figure as a result we find that the notes are relevant in establishing the purpose behind the execution of the revised agreementdollar_figure 24as a result of a pretrial discovery request by respondent the notes were retrieved from storage by the law firm and given to petitioners petitioners then objected to disclosure to respondent on the basis of attorney-client_privilege in a pretrial order we found that petitioners had waived any attorney-client_privilege and ordered petitioners to produce the notes see 104_tc_677 25petitioners argue that there is nothing to indicate that the attorney's notes are relevant to decedent's intent we find that the notes revealing the objectives of the attorneys for decedent are probative of decedent's intent the attorneys were acting on behalf of decedent and trying to achieve his objectives it is unrealistic to think that the concerns revealed in these notes were not shared with and concurred in by decedent third we believe that the revised agreement was misleading with regard to the date of execution the revised agreement was titled buy-sell_agreement and stated at the outset that it was made and entered into as of the 2nd day of january which was the date of the original buy-sell_agreement nothing in the revised agreement states that it was a revision of a prior agreement ronald signed the agreement as the custodian for each of his three children although by he was no longer the custodian of two of them the agreement contains the signatures of ronald's children cameron m ronald ii and kelly long with the respective dates date date and date these dates are the dates of their respective 18th birthdays ronald wrote these dates on the revised agreement despite the fact that two of the dates precede the creation of the document ronald signed the revised agreement as secretary of camvic despite the fact that his position in was corporate president and decedent signed as president of camvic even though he was corporate secretary in decedent and his attorneys knew how to execute amendments by providing the correct date and identifying the document as a revision indeed the record indicates that they did just that when they amended the cwb trust on several different occasionsdollar_figure 26when respondent began the audit of the estate_tax_return ronald failed to disclose that the agreement had been revised in at trial ronald testified that he just didn't remember it at all petitioners argue that courts have upheld fixed price agreements in similar circumstances and that case law supports their position we disagree the facts in the present case are clearly distinguishable from those in cases where fixed price agreements were upheld for instance in estate of littick v commissioner t c pincite a corporation purchased the decedent's shares at death pursuant to a buy-sell_agreement for a price that was less than the stock's fair_market_value on the date of the decedent's death in holding the agreement controlling for estate_tax_valuation purposes we stated that there is nothing in the record to indicate that the dollar_figure figure was not fairly arrived at by arm's-length negotiation or that any_tax avoidance scheme was involved id pincite in estate of littick the corporation had three shareholders who held almost equal shares and this court was convinced that the agreement was the product of arm's-length bargaining in the instant case in contrast the buy-sell_agreement was executed following a single meeting among decedent who was an 86-percent majority shareholder ronald and mr hughes decedent's longtime attorney who represented all parties to the agreement in addition we have already noted the extensive evidence of testamentary device present in this case in rudolph v united_states aftr 2d ustc par big_number s d ind a buy-sell_agreement which required a corporation to purchase the decedent's shares at death for dollar_figure per share was held to control the value for estate_tax purposes however the facts in rudolph are distinguishable first the agreement at issue in rudolph provided for review of the stock purchase_price at the annual stockholders meeting in addition the district_court found that there was no intent to escape the payment of estate_taxes there was no evidence in the record with respect to any discussion of the tax consequences that would result from the buy-sell_agreement id pincite9 ustc at dollar_figure finally petitioners argue on brief that if decedent's purpose in entering into the buy-sell_agreement was testamentary he would not have agreed to restrict his right to make gifts of his shares to family members petitioners contend that decedent could have achieved significant estate_tax savings by making annual gifts during the years after the buy-sell_agreement was executed until his death in petitioners' argument misses the mark as they fail to recognize that continuous gifts over such a sustained period would have ultimately deprived decedent of his controlling_interest in camvic this would have been unacceptable to decedent whom petitioners describe on brief as a controlling person in hi sec_27petitioners' reliance on several other cases is similarly misplaced in 57_f2d_682 2d cir the court_of_appeals for the second circuit did not even address the issue of testamentary device in 194_f2d_396 2d cir the court_of_appeals for the second circuit stated that here the district_court found that there was no purpose to evade taxes in 36_bta_246 affd 100_f2d_639 3d cir the board_of_tax_appeals found that the option was not a substitute for testamentary_disposition or a device for avoiding tax the board also found that the final price per share had resulted from genuine arm's-length negotiations business and in his personal life we hold that decedent had a testamentary purpose in entering into both the and agreements petitioners argue that the existence of a testamentary intent should not be determinative if the price in the buy-sell_agreement represented the fair_market_value on the date the agreement was executed citing estate of lauder v commissioner tcmemo_1992_ and 69_tc_32 respondent argues that cases such as estate of lauder and estate of bischoff involved formula prices that accounted for variations in future value and are distinguishable from fixed price agreements we need not decide this point because we find that petitioners have not proven that dollar_figure was the fair_market_value for a share of camvic in either or where shareholders are members of the same family and the circumstances indicate that testamentary considerations influenced the decision to enter into a restrictive stock agreement an assumption that the price stated in the agreement is a fair one is unwarranted it is then incumbent upon the estate to demonstrate that the agreement establishes a fair price for the subject stock estate of gloeckner v commissioner tcmemo_1996_148 estate of lauder v commissioner supra such is petitioners' burden in the instant case both parties presented expert evidence regarding the value of camvic on the respective and dates of the two agreements although expert opinions can assist the court in evaluating a claim we are not bound by the opinion of any expert and may reach a decision based on our own analysis of all the evidence in the record 304_us_282 108_tc_25 questions of value are an inherently imprecise exercise 48_tc_502 estate of lauder v commissioner supra petitioners rely upon the expert reports and testimony of matthew g kimmel a national director in the chicago illinois office of arthur andersen's valuation services group mr kimmel is a licensed realtor in the state of indiana and a certified general real_estate appraiser in several states in the instant case mr kimmel relied upon the income and cost approaches in determining camvic's fair_market_value in and dollar_figure in his report which was introduced at trial mr kimmel 28there are three generally accepted methods of determining the value of stock the market comparison approach the income approach and the cost approach fishman valuation termination and methodology in financial valuation businesses and business interests par zukin ed under the market comparison approach the value of a company's stock is determined by comparison to the stock of similar companies with publicly traded stock under the cost or asset-based approach the value of stock is equal to the fair_market_value of the company's assets less the total amount of its liabilities finally under the income approach the value of stock is equal to the present_value of a company's future income stream see id pars see also morton v commissioner tcmemo_1997_166 with respect to the market approach mr kimmel's report stated that it was considered but not relied upon in the determination of continued concluded that the fair_market_value of camvic using the cost approach was dollar_figure or dollar_figure per share as of date and dollar_figure or dollar_figure per share as of april dollar_figure applying the income approach and in particular the discounted debt-free cash- flow method mr kimmel concluded that camvic's fair_market_value was dollar_figure or dollar_figure per share as of date and dollar_figure or dollar_figure per share as of date in reconciling these differences mr kimmel in his report accorded a majority of the weight to the income approach and minimal weight to the cost approach in his report mr kimmel ultimately concluded that camvic's fair_market_value was dollar_figure million or dollar_figure per share as of date and dollar_figure million or dollar_figure per share as of date for the reasons set forth below we find that neither petitioners nor their expert have demonstrated that the fixed price per share as set out in the buy-sell_agreement reflected adequate continued value in his report mr kimmel stated that no comparables were found which were reflective of the business in which camvic and camron were engaged and two businesses were found comparable to ferguson 29the disagreement between the parties' experts with respect to value pursuant to the cost approach is due to their differences over the fair_market_value of the underlying corporate assets while there are relatively small differences over the amount of corporate liabilities the differences with respect to corporate liabilities would have little impact on the value of the corporate stock and full consideration for the camvic stock includable in decedent's_estate first we note that during his testimony mr kimmel himself corrected a number of errors in his report for instance mr kimmel's report listed the value of the lakeview apartments under the income approach--mr kimmel's preferred approach--at dollar_figure as of the time of the revised agreement at trial mr kimmel testified that he received information subsequent to submission of his report which caused him to increase his income approach valuation of lakeview to dollar_figure mr kimmel's report also stated that the income approach value of victory tower as of date was dollar_figure however at trial mr kimmel testified that he had relied upon suspect data in the original report and that he had changed his valuation under the income approach to dollar_figure the valuation determined by respondent mr kimmel's report applied a liquidity discount in his cost approach valuation of camvic and its subsidiaries camron and ferguson for both and mr kimmel testified that this was erroneous as the discount should have been applied at camvic's level only in his report mr kimmel valued camvic using the cost approach at dollar_figure per share in and dollar_figure per share for at trial mr kimmel increased his valuations under the cost approach to dollar_figure per share and dollar_figure per share for and respectively at the trial mr kimmel 30mr kimmel's final estimate of value for this property was dollar_figure concluded that his corrections had no effect on his ultimate conclusion that the value of camvic's stock in date and date was dollar_figure million or dollar_figure per share and dollar_figure million or dollar_figure per share respectively second while mr kimmel relied primarily upon the income approach in determining the value of camvic's stock he failed to provide an adequate explanation to justify his chosen expense estimates which serve to reduce the valuation of a property under the income approach when valuing dina terrace and dina tower mr kimmel estimated that expenses would be and percent of gross_income for and respectivelydollar_figure it is well established that estimates and assumptions not supported by independent evidence are of little assistance and will not be accepted as probative of value see eg 88_tc_386 affd 868_f2d_851 6th cir 84_tc_722 third we note that mr kimmel valued several properties below the value determined by hamilton county ohio for purposes of the county's property_tax assessment the parties have stipulated that hamilton county computes the assessed value of real_property by multiplying the county's estimate of market_value by percent using this formula we have determined that hamilton county 31in contrast the computations regarding dina terrace and dina tower prepared by mr hughes in show gross revenue of dollar_figure and operating_expenses of dollar_figure indicating that expenses were only percent of gross_income see supra p estimated dina terrace and dina tower at a combined value of approximately dollar_figure in and dollar_figure in mr kimmel valued these properties at dollar_figure million and dollar_figure million for and respectively in addition under the above formula hamilton county computed the value of the lakeview apartments in at approximately dollar_figure while mr kimmel valued them at dollar_figure for the same period thomas p dwyer respondent's expert witness stated in his report that it has been my experience that properties in hamilton county are valued conservatively generally county values are less than the fair_market_value unlike mr kimmel mr dwyer was quite familiar with the hamilton county area hamilton county's valuations reinforce the conclusion that mr kimmel undervalued properties in computing his valuation of camvicdollar_figure finally we note the variation between mr kimmel's valuation and the valuations of camvic's stock which occurred between and on date camvic merged with brgc and bommer builders inc and camvic was the surviving corporation in the merger the value of camvic stock used to compute the exchange ratio for the merger was dollar_figure per share in addition between and decedent made gifts of camvic stock to his children and grandchildren decedent valued each of these gifts pincitemr dwyer also stated in his report that very few properties have county values higher than the actual market_value the few properties that are overvalued are normally appealed and subsequently revised we note that camvic successfully protested victory tower's value and the county revised its assessed tax value from dollar_figure to dollar_figure dollar_figure per share for gift_tax purposes the original buy-sell_agreement was entered into in date and set the price for camvic stock at dollar_figure per share neither petitioners nor their expert gave any explanation for the approximately dollar_figure or greater than percent decline in the value of camvic stock between and moreover following our review of the record we have also been unable to find any reason--outside of estate_tax planning--to justify such a decline in value we conclude that petitioners have not met their burden of proving that the price per share set forth in the buy-sell_agreement or the revised agreement reflected adequate_and_full_consideration for decedent's interest in camvic stockdollar_figure estate of gloeckner v commissioner tcmemo_1996_148 estate of lauder v commissioner tcmemo_1992_736 thus we hold that the fixed price of dollar_figure price per share set forth in both agreements is not binding for estate_tax purposes as a result of our decision further proceedings will be necessary to determine the actual fair_market_value of camvic stock at the time of decedent's death on date appropriate orders will be issued 33even petitioners' expert determined that the value of camvic's stock exceeded dollar_figure per share as of date