Family Limited Partnerships : Taxes , Courts , and an Uncertain Future — Part I
نویسنده
چکیده
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 flung the so-called “§ 2036” argument at the FLP. The § 2036 argument involves transfers by a taxpayer that normally would place transferred assets out of the taxpayer’s estate. Under § 2036 of the Internal Revenue Code (“Code”),2 in certain instances where the taxpayer retains an interest in a transferred asset, the asset is brought back into the estate for estate tax purposes. Due to the Service’s success with the § 2036 argument, many practitioners are wondering if the golden age of FLPs finally has come to an end. Part I of this article briefly examines several § 2036 cases. It also discusses current concerns that now fit hand-inglove with the FLP. Part II of the article, which will appear in this column later this year, will examine the Fifth Circuit Court of Appeals’ holding on an important § 2036 case, Kimbell v. U.S.,3 on which the court is expected to rule in 2004. Part II also will discuss what that holding may mean for the future of FLPs and other like entities, suggest ways to protect established FLPs, and address what to consider when establishing new FLPs.
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