Two brothers bought life insurance to keep their company in the family, and the Supreme Court counted the payout in the dead brother's estate

Michael and Thomas Connelly were the only shareholders of Crown C Supply, a small building supply company in St. Louis. Michael owned 77.18 percent and Thomas 22.82 percent. They signed an agreement to keep the company in the family: if one brother died, the other could buy his shares, and if he declined, the company had to buy them. Crown bought $3.5 million of life insurance on each brother to pay for it. Michael died in 2013. Thomas chose not to buy. Michael's son and Thomas agreed the shares were worth $3 million, and Crown paid that sum to the estate and kept the other $500,000 of insurance. Thomas, as executor, reported the shares at $3 million. The IRS counted the $3 million of insurance as a company asset, valued Crown at $6.86 million and Michael's shares at $5.3 million, and assessed $889,914 more tax. The estate paid and sued for a refund. It lost in the district court and in the Eighth Circuit. On 6 June 2024 the Supreme Court ruled unanimously, in an opinion by Justice Thomas, that the company's duty to buy back the shares did not reduce their value. The Court said the result was "a consequence of how the Connelly brothers chose to structure their agreement." Mayer Brown calculated that the buyout had moved about $2.2 million of value from Michael's estate to Thomas.