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The nature of the assets that were contributed to SFLP
supports the conclusion that management of those assets was not
the purpose of SFLP. There were no operating business assets
contributed to SFLP. Decedent transferred cash, securities, life
insurance policies, annuities, real estate, and partnership
interests to SFLP. The cash and securities approximated
75 percent of the value of the assets transferred. No active
business was conducted by SFLP following its formation.
The actual control exercised by Mr. Gulig, combined with the
99-percent limited partnership interest in SFLP and the
47-percent interest in Stranco, suggest the possibility of
including the property transferred to the partnership in
decedent’s estate under section 2036. See, e.g., Estate of
Reichardt v. Commissioner, 114 T.C. 144 (2000). Section 2036 is
not an issue in this case, however, because respondent asserted
it only in a proposed amendment to answer tendered shortly before
trial. Respondent’s motion to amend the answer was denied
because it was untimely. Applying the economic substance
doctrine in this case on the basis of decedent’s continuing
control would be equivalent to applying section 2036(a) and
including the transferred assets in decedent’s estate. As
discussed below, absent application of section 2036, Congress has
adopted an alternative approach to perceived valuation abuses.
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