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individually, not to the partnership. In the case of Betsy and
George, their partnership agreement was amended in 1994 so that
George, and not the partnership, received all income from the sale
of timber on the Vermont property that prior to the amendment
George had contributed to the partnership. Thus, although each of
decedent’s children (and/or their spouses) invested in the
partnerships, they kept their own assets, as well as any income
those assets may have generated, effectively separate from those of
decedent. They, like decedent, merely “recycled” their property
through the partnership form.12
Moreover, although decedent’s stocks and bonds formed the
principal assets of both partnerships, no substantial change in
investment strategy or activity took place from the date decedent
transferred the assets to the partnerships to the date of his
death.
In the final analysis, neither decedent nor his family
conducted the partnerships in a businesslike manner. None of the
parties involved in the partnerships joined together with the
intent to either form business enterprises or otherwise to conduct
12 The practice continued after decedent’s death. When
Betsy and George sold their private residence, Woodside Farm, they
included the 22 acres of Woodlands Property adjacent to their home
in the same sale. After the sale, they allocated to the Turner
Partnership an amount of the Woodside Farm/Woodlands Property sales
proceeds that exactly equaled the partnership’s basis in the
Woodlands Property. In so doing, they effectively eliminated any
partnership gain or loss from the sale for Federal tax purposes.
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