- 15 - family limited partnerships with identical liquidation restrictions. Shortly after formation, the taxpayers transferred limited partnership interests to their children by gift. On their Federal gift tax return, the taxpayers claimed substantial discounts in the value of the interests compared to the value of the underlying assets due to lack of control and lack of marketability. The partnership agreements provided that the partnerships would continue for 50 years. The Court held: Respondent’s reliance on TRLPA section 6.03 is misplaced. TRLPA section 6.03 governs the withdrawal of a limited partner from the partnership--not the liquidation of the partnership. TRLPA section 6.03 sets forth limitations on a limited partner’s withdrawal from a partnership. However, a limited partner may withdraw from a partnership without requiring the dissolution and liquidation of the partnership. In this regard, we conclude that TRLPA section 6.03 is not a “limitation on the ability to liquidate the entity” within the meaning of section 25.2704-2(b), Gift Tax Regs. Id. at 473. In sum, the Court concluded that the partnership agreements in Kerr were not more restrictive than the limitations that generally would apply to the partnerships under Texas law. See id. at 472-474. Respondent acknowledges that Kerr is applicable to this issue but argues that Kerr was incorrectly decided. However, we find no reason to reach a result that is different than the result in Kerr. Thus, section 2704(b) doesPage: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Next
Last modified: May 25, 2011