Vanderbilt Law Review


William J. Bowe

First Page



In Estate of John Q. Strange, there was an agreement between two brothers, engaged in business in a close corporation, which provided that upon the death of either, the survivor might acquire the stock of the other upon payment of $10,000 to his estate. Payment was so made following the decedent's death. The fair market value of the stock on the date of death was stipulated to be $238,126.54. The Board of Tax Appeals held that the option price of $10,000 was the proper amount to be included in the decedent's gross estate as the value of his stock.

In Lomb v. Sugden, the decedent owned at death a number of shares of stock which she bequeathed to her husband as part of her residuary estate. About a year prior to death she had entered into an agreement with the other stockholders of the company that none would sell his stock without first offering it to the other stockholders, who were to have the right to purchase "in proportion to their then respective common stockholdings" at approximately $69 per share. The controversy involved the question whether the Commissioner might value the stock at its fair market value of $100. It was held that because of the agreement the decedent could not have secured a greater price than $69 at the time of her death and, therefore, the value for estate tax purposes could not exceed that sum.

One further case may be noted. In Commissioner v. Bensel, a father and son had become estranged. The father, a majority stockholder, arid the son, an employee of a corporation, entered into a contract in which the son agreed to continue to work for the company in return for an option to purchase his father's stock at the latter's death at a price which turned out to be considerably less than the value of the stock at the later date. The option price was held to fix the value for estate tax purposes.