- 42 -
In summary, we are satisfied that HFLP was created
principally as an alternate testamentary vehicle to the Trust.
Taking this feature in light of all that is discussed above, we
conclude that decedent retained enjoyment of the contributed
property within the meaning of section 2036(a).
D. Existence of Consideration
Having decided that decedent retained enjoyment of the
transferred assets for purposes of section 2036(a), we turn to
the question whether the statute’s application may nonetheless be
avoided on the basis of the parenthetical exception for “a bona
fide sale for an adequate and full consideration in money or
money’s worth”. The estate contends:
The primary reason why I.R.C. �2036 does not apply
to Petitioner is that the Trust’s transfer of the
Portfolio to the Partnership in exchange for a credit
to its capital account for 99% of the fair market value
of the Portfolio assets and a 99% interest in profits
and losses is a “bona fide sale for an adequate and
full consideration in money or money’s worth.” * * *
We, however, disagree on the ground that the estate’s
position fails to take into account significant aspects of the
jurisprudence addressing this exclusionary language. The phrase,
as used in a predecessor statute, was explained in early caselaw
of this Court, as follows:
Accordingly, the exemption from tax is limited to those
transfers of property where the transferor or donor has
received benefit in full consideration in a genuine
arm’s length transaction; and the exemption is not to
be allowed in a case where there is only contractual
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011