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Ps filed Federal gift tax returns for 1994 and 1995.
Ps computed the value of the limited partnership
interests in KFLP that they transferred to the GRAT’s by
applying discounts for lack of liquidity and minority
interest. Ps computed the value of the limited
partnership interests in KILP that they transferred to
their children by applying a discount for lack of
liquidity. R determined that sec. 2704(b), I.R.C., bars
Ps from applying a discount for lack of liquidity in
computing the value of the partnership interests that Ps
transferred to the GRAT’s and to their children.
Ps filed a motion for partial summary judgment
arguing that sec. 2704(b), I.R.C. is not applicable
alternatively because: (1) The GRAT’s trustees received
only assignee interests, as opposed to limited
partnership interests; (2) the disputed transfers must be
valued as assignee interests under sec. 25.2512-1, Gift
Tax Regs.; and (3) the restrictions on liquidation set
forth in the partnership agreements do not constitute
“applicable restrictions” within the meaning of sec.
2704(b), I.R.C.
Held: Ps transferred limited partnership interests
to the GRAT’s in both form and substance.
Held further: Pursuant to sec. 25.2512-1, Gift Tax
Regs., the value of the limited partnership interests is
equal to the price that a hypothetical willing buyer
would pay to a willing seller for the limited partnership
interests.
Held further: The restrictions on liquidation in
dispute do not constitute “applicable restrictions”
within the meaning of sec. 2704(b), I.R.C.
John W. Porter, for petitioners.
Lillian D. Brigman and John D. Maceachen, for respondent.
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Last modified: May 25, 2011