Cameron W. Bommer Revocable Trust v. Commissioner
| Decision Date | 20 August 1997 |
| Docket Number | Docket No. 15484-94.,Docket No. 15485-94. |
| Citation | 74 T.C.M. 346 |
| Parties | Cameron W. Bommer Revocable Trust, Ronald Bommer, Trustee v. Commissioner. Estate of Cameron W. Bommer, Deceased, Marcella Bommer, Executrix, Ronald J. Bommer, Residuary Trustee, Trustee, and Executor, Cameron M. Bommer, Executor, Ronald Bommer II, Executor, Kelly Long, Executrix v. Commissioner. |
| Court | U.S. Tax Court |
Marc W. Rubin, Cincinnati, Ohio, Burgess L. Doan, Janet L. Houston, and Michael R. Schmidt, for the petitioners. Robin L. Herrell and Matthew J. Fritz, for the respondent.
MEMO FINDINGS OF FACT AND OPINION
In Docket No. 15484-94, respondent determined a deficiency in petitioner Cameron W. Bommer Revocable Trust's generation-skipping transfer tax in the amount of $1,117,233. In Docket No. 15485-94, respondent determined a deficiency in petitioner Estate of Cameron W. Bommer's Federal estate tax in the amount of $4,393,397 and generation-skipping transfer tax in the amount of $1,117,233.
The issue before us is the effect, if any, of a restrictive stock agreement on the value of certain stock in CamVic Corp. that is includable in the Estate of Cameron W. Bommer (decedent). We severed this issue for trial and opinion. The remaining issues, if not settled, will be decided in subsequent proceedings.
Unless otherwise indicated, all section references are to the Internal Revenue Code as in effect for the date of decedent's death, and all Rule references are to the Tax Court Rules of Practice and Procedure.
Some of the facts have been stipulated and are so found. The stipulation of facts is incorporated herein by this-reference. Decedent was born January 9, 1913, and died testate on September 10, 1990. Decedent was survived by his wife, Marcella Bommer (Marcella), his only child, Ronald J. Bommer (Ronald), and Ronald's three children: Cameron M. Bommer (Cameron M.), Kelly Long, and Ronald Bommer II (Ronald II).1 Decedent and Marcella were married in the early 1930's, and they remained married until decedent's death.
On September 19, 1990, Marcella was appointed the executrix of decedent's estate.2 On June 4, 1991, Marcella filed a United States Estate (and Generation-Skipping Transfer) Tax Return (Form 706) on behalf of the estate. On August 23, 1991, decedent's estate was closed final distributions were made from the estate, and Marcella was discharged as executrix.
CamVic Corp. (CamVic) is a closely held company that was incorporated in the State of Ohio on October 17, 1958. Decedent and Victor Fay started CamVic with total capital contributions of $500.3 Of the five voting shares of CamVic issued at its inception, two shares were held by decedent, one share was held by Marcella, and two shares were held by Victor Fay.
At the time of decedent's death, CamVic owned and managed real property in Ohio, Indiana, and Florida. See infra p. 16. Ronald, who began working at CamVic in 1959, drew the plans for and supervised the construction of several of CamVic's properties. Ronald was also responsible for the management and maintenance of the properties.
As of May 11, 1965, the ownership of CamVic was as follows:
Individual Shares Owned
Decedent ...................... 131
Marcella ...................... 1
Victor Fay .................... 88
On this date, Victor Fay sold his entire interest in CamVic to the corporation for $21,654.16 and was replaced by Ronald on the board of directors.
On June 21, 1971, CamVic was merged with two other corporations owned by the Bommer family — Bommer Road Golf Course, Inc.4 (BRGC), and Bommer Builders, Inc.5 CamVic was the surviving corporation in the merger. The value of CamVic stock used to compute the exchange ratio for the merger was $14,192.45 per share.
On January 5, 1973, decedent created the Cameron W. Bommer Trust (CWB Trust),6 to which he transferred his entire interest in CamVic. Although revocable during decedent's lifetime, the trust was to become irrevocable upon his death. Decedent reserved the right to vote his CamVic stock as well as to preclude its sale or transfer during his lifetime. Kenneth Hughes was the sole trustee of the CWB Trust from its inception through April 27, 1981, when he was replaced by Ronald. Ronald remained sole trustee through the date of decedent's death.7 Until the time of decedent's death, CamVic stock was the only asset held by the trust.
During 1969 through 1975, decedent filed gift tax returns or amended gift tax returns on the dates listed below, which reflected the following gifts of CamVic stock, as well as their per-share value:
Date of Per-share
Date of Gift Gift Tax Return No. of Shares Recipient of Gift Value
07/01/68 .................. 01/08/69 9 Ronald $ 7,091.07
01/02/72 .................. 12/28/73 .3972 Ronald II 15,105.74
01/02/72 .................. 12/28/73 .3972 Cameron M. 15,105.74
01/02/72 .................. 12/28/73 .3972 Kelly Long 15,105.74
01/02/72 .................. 04/17/74 .3972 Ronald 15,105.74
12/20/72 .................. 12/28/73 .3972 Ronald II 15,105.74
12/20/72 .................. 12/28/73 .3972 Cameron M. 15,105.74
12/20/72 .................. 12/28/73 .3972 Kelly Long 15,105.74
12/20/72 .................. 04/17/74 .3972 Ronald 15,105.74
01/04/74 .................. 04/17/74 .3972 Ronald II 15,105.74
01/04/74 .................. 04/17/74 .3972 Cameron M. 15,105.74
01/04/74 .................. 04/17/74 .3972 Kelly Long 15,105.74
01/04/74 .................. 04/17/74 .3972 Ronald 15,105.74
01/01/75 .................. 05/13/75 .5294 Ronald II 11,333.30
01/01/75 .................. 05/13/75 .5294 Cameron M. 11,333.30
01/01/75 .................. 05/13/75 .5294 Kelly Long 11,333.30
01/01/75 .................. 05/13/75 .5294 Ronald 11,333.30
Ronald served as custodian for all gifts to his children who were minors at that time.
The above gifts left the ownership of CamVic's stock as of January 1, 1975, as follows:
Shareholder Shares Owned Percentage Owned
CWB Trust ............................................ 117.7568 86.0
Marcella ............................................. 2.55013 1.9
Ronald ............................................... 11.4256 8.9
Cameron M ............................................ 1.721 1.3
Ronald II ............................................ 1.721 1.3
Kelly Long ........................................... 1.721 1.3
Following decedent's gifts of January 1, 1975, the ownership of CamVic's `stock remained unchanged until decedent's death on September 10, 1990.
CamRon Corp. (CamRon) was incorporated on August 19, 1965. Of the 1,000 shares issued, CamVic held 610, Joseph Klawitter and Joseph Westerhaus each held 145, and Edwin Fay held 100. The shareholders paid $100 per share. At the time of decedent's death, CamRon owned several real properties in Ohio and Missouri. See infra p. 17.
On August 30, 1965, a Stock Retirement Agreement was executed between CamRon and Messrs. Klawitter, Westerhaus, and Pay. The agreement stated that "the Corporation will herein agree to purchase the shares of the said stock of any of the Stockholders in the event of his death, subject to all of the terms and provisions hereof". CamRon would purchase the shares of a stockholder upon his death for $100 per share. The agreement also provided that, in the event a shareholder desired to sell his shares during his lifetime, he was first required to offer the shares to the corporation at the stated price per share. The agreement provided for periodic reevaluation of the stock price, and the price per share was, in fact, modified on several occasions. The final modification was executed on June 29, 1977, and increased the purchase price to $300 per share. CamVic, the majority shareholder, was not a party to the agreement.
On September 29, 1978, Messrs. Westerhaus and Klawitter sold their shares to CamRon for a price of $517.24 per share, which was in excess of the purchase price set forth in the modified agreement. Following the sale, CamVic held 610 shares of CamRon, and Edwin Fay held 100 shares. On June 30, 1982, CamVic sold to Edwin Fay 43 shares of CamRon stock for $517.25 per share. Following the sale, CamVic held 567 shares of CamRon (79.86 percent), and Edwin Fay held 143 shares (20.14 percent). On this same date, CamRon and Edwin Fay entered into an agreement whereby Edwin Fay agreed that if he desired to sell his shares, he would offer them first to CamRon and/or the other shareholders.
Ferguson Enterprises, Inc. (Ferguson), was incorporated on September 12, 1967. Upon incorporation, its stock was held as follows:
Shareholder No. of Shares
Edwin Fay ....................... 2
Joseph Westerhaus ............... 3
Joseph Klawitter ................ 3
Marcella Bommer ................. 10
Ronald Bommer ................... 2
In November 1969, CamRon purchased 500 shares of Ferguson stock for $S0,000, and the ownership of Ferguson's stock remained unchanged through 1975.
On November 17, 1967, Messrs....
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