- 13 -
transferred assets to it, and transferred interests in the
partnership to their children’s trusts, and that we must
recognize the partnership for Federal gift tax valuation
purposes. We agree with petitioners.
State law determines the nature of property rights, and
Federal law determines the appropriate tax treatment of those
rights. See United States v. National Bank of Commerce, 472 U.S.
713, 722 (1985); United States v. Rodgers, 461 U.S. 677, 683
(1983); Aquilino v. United States, 363 U.S. 509, 513 (1960). The
parties stipulated that the steps followed in the creation of the
partnership satisfied all requirements under Texas law, and that
the partnership has been a limited partnership under Texas law
since it was created. Thus, the transferred interests are
interests in a partnership under Texas law. Petitioners have
burdened the partnership with restrictions that apparently are
valid and enforceable under Texas law. The amount of tax for
Federal estate and gift tax purposes is based on the fair market
value of the property transferred. See secs. 2502, 2503. The
fair market value of property is “the price at which such
property would change hands between a willing buyer and a willing
seller, neither being under any compulsion to buy or to sell, and
both having reasonable knowledge of relevant facts.” See sec.
20.2031-1(b), Estate Tax Regs.; sec. 25.2512-1, Gift Tax Regs.
We apply the willing buyer, willing seller test to value the
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011