Family Limited Partnerships: Discounts, Options, and Disappearing Value

Family limited partnerships and control discounts

Distributing assets to Family Limited Partnerships (FLPs) is an estate planning technique designed to reduce assets subject to estate taxation. This paper discusses power index models as measures of power along with extensions of indices to value minority discounts. Power indices and valuation models proposed here are directly applicable to valuing other business entities, particularly where co...

Family limited partnerships preserve wealth.

Real Options in Partnerships

We study partnership contracts under uncertainty but with clauses that admit downstream flexibility. The focus is on effects of flexibility on the synergy set, the core, of the contract. In a partnership context the value of flexibility is captured by the partners who own the right to exercise. On one side, there are cooperative options, which are exercised jointly and in the interest of maximi...

Limited Partnerships and Reputation Formation

This paper analyzes the optimal quality decision of a producer in a multi-period setting with reputation effects. Using a unique database of returns on real estate limited partnerships (RELPs), we empirically examine alternative theoretical predictions of optimal producer strategy. In particular, we test whether the producers in our market invest in reputation building by initially selling high...

Family Limited Partnerships : Taxes , Courts , and an Uncertain Future — Part I

The family limited partnership (“FLP”) has ascended to the summit of favored estate planning techniques in the past decade or so.1 For years, the FLP appeared to be almost invincible, although the Internal Revenue Service (“Service”) volleyed numerous attacks at the FLP, only to be repeatedly defeated by the courts—that is, until recently. In several recent cases, the Service has successfully f...