Wrong wording kills exclusion for limited partnership interest gifts
Article Abstract:
The family limited partnership (FLP) has become a common tool for the transfer of family wealth that allows the use of life-time transfer tax exemption, the generation-skipping transfer tax exemption and the annual per-donee gift tax exclusion through a discounted valuation of the underlying gift assets. The IRS has traditionally been lenient toward these limited partnerships but reversed its stance in 1997 with the introduction of TAM 9751003. In the memorandum, the agency found that the gifts of limited partnership interests were not eligible for annual exclusion since they can be considered as gifts of future interests. This may seem to be a major obstruction to the leveraging potential of FLPs. However, this case involved a partnership agreement that features inordinary, highly aggressive provisions, which appear to be the product of overeager effort to cut the value of the partnership interests for gift tax purposes.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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The family limited partnership under siege
Article Abstract:
The IRS has been cracking down on family limited partnerships (FLP) that abuse minority discounts for transfers among family members. Such discounts were intended specifically for corporations with a single class of stock under Rev Rul 93-12. However, they are being taken advantage of by FLPs seeking large discounts for minority interests and lack of control. The IRS has been issuing a series of technical advice memoranda to discourage this practice. The Service is particularly concerned about discounts claimed by FLPs that hold only or mostly publicly traded securities, formed with a power of attorney, and involve a decedent who died not long after the transfer of assets. However, despite the new stringent rules, FLPs can still avail of valuation discounts if they are well-planned, well-documented and well-managed.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1997
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