Financial Planner

Answer: D - Buy-sell agreements are contracts binding the owner of a business interest to sell the business interest for a specified or determined price at his or her death or disability. If a fixed price is used in the buy-sell agreement, the IRS will take a long look at it. Planners should suggest the client use a formula that allows for the business value to increase or decrease as time passes. If a formula is not appealing, then an appraisal for the business at the time of the decedent’s death will help avoid the IRS’s scrutinizing the value of the agreement.