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enhanced by the contributions of decedent. Therefore, the
contributions do not reflect taxable gifts.
Because the contributions do not reflect taxable gifts, we
need not decide whether the period of limitations for assessment
of a deficiency due to a gift on formation has expired.
Section 2704(b)
Respondent determined in the statutory notice, and argues in
the alternative, that provisions in the partnership agreements
constitute applicable restrictions under section 2704(b) and must
be disregarded when determining the value of the partnership
interests that were transferred by gift.
Section 2704(b) generally states that, where a transferor
and his family control a partnership, a restriction on the right
to liquidate the partnership shall be disregarded when
determining the value of the partnership interest that has been
transferred by gift or bequest if, after the transfer, the
restriction on liquidation either lapses or can be removed by the
family. Section 25.2704-2(b), Gift Tax Regs., provides that an
applicable restriction is a restriction on “the ability to
liquidate the entity (in whole or in part) that is more
restrictive than the limitations that would apply under the State
law generally applicable to the entity in the absence of the
restriction.”
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