- 26 -
also Schultz v. United States, 493 F.2d 1225 (4th Cir. 1974);
Johnson v. Commissioner, supra.
On the basis of our review of the record, we are persuaded by
a number of factors that petitioners, in substance, as in form,
transferred limited partnership interests to the GRAT’s trustees.
As discussed below, the factors that we have relied upon in support
of our holding on this point include petitioners' failure to
respect the literal terms of the partnership agreement, the form of
the transfers, and the economic realities and tax motivation
underlying the transfers.
A. Failure To Comply With The Partnership Agreement
Petitioners failed to adhere strictly to the literal terms of
the KFLP partnership agreement governing transfers of general
partnership interests. Specifically, when KFLP was formed,
petitioners transferred three life insurance policies on their
lives to the partnership. The Kerr children did not contribute any
assets to the partnership. Consistent with the terms of the
partnership agreement, petitioners admit that they initially were
the sole general partners of KFLP. Pursuant to section 4.01 of the
partnership agreement, petitioners subsequently assigned a portion
of their general partnership interests in KFLP to each of their
children.
Significantly, under the plain language of section 8.20 of the
KFLP partnership agreement, petitioners' inter vivos transfers of
Page: Previous 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 NextLast modified: May 25, 2011