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what property would be contributed to capitalize the entity, and
declared what interest the Trust would receive therein. He
essentially stood on both sides of the transaction and conducted
the partnership’s formation in absence of any bargaining or
negotiating whatsoever. It would be an oxymoron to say that one
can engage in an arm’s-length transaction with oneself, and we
simply are unable to find any other independent party involved in
the creation of HFLP.
Furthermore, lack of a bona fide sale aside, we believe that
to call what occurred here a transfer for consideration within
the meaning of section 2036(a), much less a transfer for an
adequate and full consideration, would stretch the exception far
beyond its intended scope. In actuality, all decedent did was to
change the form in which he held his beneficial interest in the
contributed property. We see little practical difference in
whether the Trust held the property directly or as a 99-percent
partner (and entitled to a commensurate 99-percent share of
profits) in a partnership holding the property. Essentially, the
value of the partnership interest the Trust received derived
solely from the assets the Trust had just contributed. Without
any change whatsoever in the underlying pool of assets or
prospect for profit, as, for example, where others make
contributions of property or services in the interest of true
joint ownership or enterprise, there exists nothing but a
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