Price-Fixing Provisions Are Not Useful Sample Clauses

Price-Fixing Provisions Are Not Useful. 2. What is a “Restriction on the Right to Sell Property?

Price-Fixing Provisions Are Not Useful. There have been numerous cases where parties have attempted to fix the value of an interest in an entity by establishing a fixed price or some methodology or other objective standard for setting the price at which an interest in the entity must be sold upon the occurrence of some event. For example, Mom may enter into a buy-sell agreement with her two children which provides that upon the first of them to die, the entity will purchase the deceased person’s interest at book value, which under the circumstances is clearly below market. Case law prior to the enactment of §2703 generally provided that in order for these types of buy-sell agreements to be valid to fix value, the agreement must be binding on all parties to sell in the event of the death of a party, and the agreement must be a bona fide business arrangement and not a device to pass the interest to the children for less than full and adequate consideration. For example, see St. Louis County Bank vs. U.S. 674 F2d 1207 (8th Cir. 1982) and Lauder Estate vs. Comr., TC Memo 1992-736. In that regard, as far as fixing the price in buy-sell agreements, §2703 pretty much codified prior law. It is submitted that trying to fix the value of an interest in an entity in a buy-sell agreement is a clumsy way to achieve a discount. Discounts can be better achieved by not trying to fix a price but instead by depressing value through enhancing discounts. Since the enactment of §2703, the cases involving agreements apparently intended to set a below market price seem to generally concede that the agreement in question operates to set a below market price but the inquiry in the case is whether that agreement is within the §2703(b) statutory exceptions.