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SFLP was validly formed under State law. The formalities
were followed, and the proverbial “i’s were dotted” and “t’s were
crossed”. The partnership, as a legal matter, changed the
relationships between decedent and his heirs and decedent and
actual and potential creditors. Regardless of subjective
intentions, the partnership had sufficient substance to be
recognized for tax purposes. Its existence would not be
disregarded by potential purchasers of decedent’s assets, and we
do not disregard it in this case.
Section 2703(a)(2)
Section 2703(a) provides as follows:
SEC. 2703. (a) General Rule.--For purposes of
this subtitle, the value of any property shall be
determined without regard to–-
(1) any option, agreement, or other right to
acquire or use the property at a price less than
the fair market value of the property (without
regard to such option, agreement, or right), or
(2) any restriction on the right to sell or
use such property.
Noting that a right or restriction may be implicit in the capital
structure of an entity, see sec. 25.2703-1(a)(2), Gift Tax Regs.,
respondent argues that section 2703(a)(2) applies to disregard
SFLP for transfer tax purposes. Respondent further argues that
the SFLP agreement does not satisfy the “safe harbor” exception
in section 2703(b).
Respondent’s brief states:
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