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III. Transfers in Issue
A. 1993 Transfers of Partnership Interests by Dave True
Effective January 1, 1993, Dave True sold part of his
ownership interest in all True companies that were partnerships
to his wife and sons, pursuant to the buy-sell agreements.
Before the transfers, Dave True held a greater than 50-percent
general partnership interest in each company. Mr. Harris
recommended that Dave True reduce his ownership interest to less
than 50 percent, in order to avoid termination of the
partnerships (for income tax purposes) at his death. Mr. Harris
was concerned that as a result of such termination, the
partnership agreements, which embodied the buy-sell provisions,
would become subject to new valuation rules under Chapter 14 of
the Internal Revenue Code (Chapter 14).23 To prevent this from
happening, Dave True sold enough of his interests to reduce his
and Jean True’s combined ownership to below 50 percent. Although
Dave True had health issues before the 1993 transfers, including
back problems and a chronic pulmonary insufficiency that required
him to be on oxygen full time, the True family and Mr. Harris did
23The parties stipulated that the True companies’ existing
partnership agreements and shareholders’ restrictive agreements
were entered into before Oct. 9, 1990 (effective date for Chapter
14 rules), and were not substantially modified after Oct. 8,
1990.
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