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Malkin - FLP Deficiencies by Mind Map: Malkin - FLP Deficiencies
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Malkin - FLP Deficiencies

2036(a) Attack

Statute

Problem Facts

Conclusion

Bona Fide Sale Exception to 2036(a)

Citing Estate of Bongard v. Commissioner, 124 T.C. 95, 118 (2005), the court requires that for the bona fide sale for adequate and full consideration exception to apply, there must be (a) the existence of a legitimate and significant nontax reason for creating the family limited partnership, and (b) the transferors received partnership interests proportionate to the value of the property transferred.

Nontax reasons for formation of partnership claimed by taxpayer, and Court responses

Indirect Gifts

Decedent transferred LLC's to the partnership before the other "partners" were in existence (they were trusts created after the date of the transfers to the partnership

Thus, at time of transfer to the partnership, there was only one partner

Under the authority of Shepherd v. Commissioner, 115 T.C. 376 (2000), affd. 283 F.3d 1258 (11th Cir. 2002), this resulted in a transfer of LLC interests to the trusts, not a transfer of partnership interests