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FOLEY, J., concurring in result: Family limited
partnerships are proliferating as an estate planning device,
taxpayers are planning amid great uncertainty, and respondent is
asserting numerous theories (i.e., economic substance, Chapter
14, section 2036, immediate gift upon formation, etc.) in an
attempt to address these transactions. It is important that we
clarify the law in this area with a careful statement of the
applicable principles. While I agree with the majority that the
partnership must be respected, I write separately to emphasize
two points.
I. The “Willing Buyer, Willing Seller” Test Is Not a Relevant
Consideration in Determining Whether a Partnership Is To Be
Respected Under State Law
I disagree with some of the reasoning set forth in the
majority opinion. Specifically, the rationale set forth for
respecting the partnership is as follows:
We do not disregard the partnership because we have no
reason to conclude from this record that a hypothetical
buyer or seller would disregard it.
* * * * * * *
* * * we believe the form of the transaction here (the
creation of the partnership) would be taken into account by
a willing buyer; thus the substance and form of the
transaction are not at odds for gift tax valuation purposes.
* * * [Majority op. pp. 14-15.]
The Knight family limited partnership is a valid legal
entity under Texas law. Even if a hypothetical buyer and seller
were to determine that the value of the partnership interest was
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