American College Exam HS330 Topic 1 Question 82 Discussion

Actual exam question for American College's HS330 exam

Question #: 82
Topic #: 1

Generally the courts will accept as the federal estate tax value of a closely held corporate business the price established by a buy-sell agreement if all the following conditions are met EXCEPT:

AThe agreement requires the payment of liquidated damages to the survivors if the executor fails to carry out its terms.

BThe agreement as to per-share value is fair, adequate, and made at arm's length.

CThe agreement requires a deceased share holder's executor to sell the stock at the price specified in the agreement.

DThe agreement requires a shareholder to first offer his stock to the corporation or other shareholders at the specified price if he wishes to sell it during his lifetime.

Show Suggested Answer

Suggested Answer: A

by Deeanna at Mar 09, 2024, 07:42 PM

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Johnna

7 months ago

Exactly, let's review the remaining options and see which one does not meet the criteria for the courts to accept the federal estate tax value.

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Long

7 months ago

So, we can eliminate options A) and D) as they are conditions that need to be met. That leaves us with options B) and C) to consider.

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Jennie

7 months ago

I believe that option D) is also a condition that must be met for the courts to accept the federal estate tax value.

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Lemuel

7 months ago

But what about option D) The agreement requires a shareholder to first offer his stock to the corporation or other shareholders at the specified price if he wishes to sell it during his lifetime?

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Jennifer

7 months ago

I agree, because if liquidated damages are involved, it may affect the true value of the stock.

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Norah

7 months ago

I think the correct answer is A) The agreement requires the payment of liquidated damages to the survivors if the executor fails to carry out its terms.

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Barbra

7 months ago

Hmm, I see your point. But I still think it could also be A, as liquidated damages might impact the acceptance of the value.

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Rochell

8 months ago

I agree with Ciara, the answer is definitely C. It doesn't make sense for the courts to accept that condition.

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Ciara

8 months ago

I disagree, I believe the answer is C. The courts wouldn't accept a value if the deceased shareholder's executor is required to sell the stock at a specified price.

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Barbra

9 months ago

I think the answer is A. The courts wouldn't accept a value if there are liquidated damages involved.

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