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believe that decedent would give up over $3 million in value to
achieve those business purposes.
Nonetheless, in this case, because we do not believe that
decedent gave up control over the assets, his beneficial interest
in them exceeded 99 percent, and his contribution was allocated
to his own capital account, the instinctive reaction that there
was a gift at the inception of the partnership does not lead to a
determination of gift tax liability. In a situation such as that
in Kincaid, where other shareholders or partners have a
significant interest in an entity that is enhanced as a result of
a transfer to the entity, or in a situation such as Shepherd v.
Commissioner, 115 T.C. __, __ (2000) (slip. op. at 21), where
contributions of a taxpayer are allocated to the capital accounts
of other partners, there is a gift. However, in view of
decedent’s continuing interest in SFLP and the reflection of the
contributions in his own capital account, he did not transfer
more than a minuscule proportion of the value that would be
“lost” on the conveyance of his assets to the partnership in
exchange for a partnership interest. See Kincaid v. United
States, supra at 1224. Realistically, in this case, the
disparity between the value of the assets in the hands of
decedent and the alleged value of his partnership interest
reflects on the credibility of the claimed discount applicable to
the partnership interest. It does not reflect a taxable gift.
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