Buy Sell Agreement Between Family Members

In a typical situation, Scroggin says, a family member works within the company 24/7 and is upset that a significant portion of the equity value he or she develops goes to other family members. Meanwhile, outside siblings are angry because the family member running the business receives a “considerable” salary and doesn`t appreciate the opinions of family owners who don`t work. However, at Estate of Lauder, the Finanzgericht gave an overview of the application of this test. The Finanzgericht concluded that a purchase/sale agreement was merely a means of reducing inheritance tax where (1) testamentary considerations influenced the parties involved and (2) did not reflect the formula in the agreement as full and appropriate consideration, since it did not set a reasonable price for the interest. The formula used was an adjusted book value formula that the Tribunal may have arbitrarily established. As the agreement did not pass the contract without testing, the terms of the agreement did not control the value of the inheritance tax of the interests. “A family business may have a CPA who is good at tax work, but not as good at family relationships,” says Schwerzler. “So, owners end up going to see a family therapist who may be good at the hot and fuzzy things of the human enterprise, but who may not understand a company`s profit motive.