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I don’t subscribe to WSJ… care to summarize?
The partnership bought $3.5M life policies on both partners (brothers). One died, corporation collected and claimed tax exemption. It was unclear whether the business was worth that much, so SCOTUS upheld the IRS challenge to the tax exemption.
This could radically change a lot of cross-coverage corporate life insurance arrangements. It isn’t clear whether it could affect COLI policies. But IMO it seems possibly pertinent, e.g., if a company buys a bunch of policies whose total benefit exceeds the value of the company. 
They added the Insurance payout to the valuation of the business since the obligation to buy the shares was not considered a debt raising the amount of estate taxes that were owed.
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Hmmm… if the life insurance is $5 million and the obligation to buy out the shares is $4 million then certainly the $1 million is profit. But the $4 million… dunno… I’d have to think some more about that.
Or you could just look up the case 
The Court’s little-noticed decision in Connelly v. United States, issued in June, throws a wrench into a common succession strategy for many closely held firms with more than one owner. In this strategy, a company buys life insurance on its owners so that when one dies, there’s cash to repurchase his or her stock.
Here is the relevant passage I think.
The IRS took a different view, insisting that Crown’s re-
demption obligation did not offset the life-insurance pro-
ceeds. The IRS counted the $3 million in life-insurance pro-
ceeds excluded by the analyst and assessed Crown’s total
value as $6.86 million ($3.86 million + $3 million). And, the
IRS thus calculated the value of Michael’s shares as $5.3
million ($6.86 million x 0.7718). Based on this higher valu-
ation, the IRS determined that the estate owed an addi-
tional $889,914 in taxes.
I don’t necessarily understand what they’ve done, but it seems like shenanigans. In Canada the proceeds would go to a notional account, tax free, then immediately be paid out of that account to purchase the shares, again, almost tax free.
Making that process not tax free has the serious potential to shut down a lot of small businesses upon the death of a partner. That’s why people do this, so the business continues instead of being shuttered or facing difficulties.
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