Ina F. Knight - Page 2




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               law, and that the partnership has been a limited                         
               partnership under Texas law since it was created.                        
                    Held:  We recognize the partnership for Federal                     
               gift tax purposes.                                                       
                    Held, further, the value of each of Ps’ gifts to                    
               their children’s trusts in 1994 was $394,515; i.e.,                      
               22.3 percent of the value of the real property and                       
               financial assets Ps transferred to the partnership,                      
               reduced by minority and lack of marketability discounts                  
               totaling 15 percent.                                                     
                    Held, further, sec. 2704(b), I.R.C., does not apply to              
               this transaction.  See Kerr v. Commissioner, 113 T.C. 449                
               (1999).                                                                  
               William R. Cousins III, Robyn A. Frohlin, Todd Allen Kraft,              
          Robert M. Bolton, Robert Don Collier, and John E. Banks, Jr., for             
          petitioners.                                                                  
               Deborah H. Delgado, Gerald Brantley, and James G. MacDonald,             
          for respondent.                                                               

               COLVIN, Judge:  In separate notices of deficiency sent to                
          each petitioner, respondent determined that each petitioner has a             
          gift tax deficiency of $120,866 for 1994.                                     
               Petitioners formed a family limited partnership called the               
          Herbert D. Knight Limited Partnership (the partnership), and gave             
          interests in it to trusts they established for their children.                
          After concessions, the issues for decision are:                               
               1. Whether, as respondent contends, the partnership is                   
          disregarded for Federal gift tax purposes.  We hold that it is                
          not.                                                                          






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