The US Supreme Court ruled that the value of stock for estate tax purposes cannot be reduced by a contractual obligation to redeem shares. This decision has significant implications for estate planning and valuation of closely held businesses. The case involved a family-owned business that had a buy-sell agreement requiring the redemption of shares upon the death of a shareholder. The Court held that the redemption obligation did not reduce the value of the stock for estate tax purposes.
The U.S. Supreme Court today unanimously affirmed the U.S. Court of Appeals for the Eighth Circuit, in upholding the judgment of a district court that the fair market value of stock in a closely-held corporation, for purposes of valuing the stock interest in the corporation held by the estate of a deceased shareholder, included life insurance proceeds intended for the redemption of the deceased shareholder’s stock interest.
The case is: Connelly v. United States, No. 23-146 (S. Ct. June 6, 2024). Read the Court’s opinion
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