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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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