Charles T. McCord, Jr. and Mary S. McCord, Donors - Page 39

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          partnership agreement so provides or all of the partners consent.           
          Id. sec. 7.04(a).  Section 8.01 of the partnership agreement                
          governs the admission of new partners to MIL.  That section                 
          provides that, notwithstanding the occurrence of a valid                    
          assignment of a partnership interest in MIL in compliance with              
          the terms of the partnership agreement, no person shall become a            
          partner without the unanimous consent of the existing partners.             
               There is no evidence indicating that all of the MIL partners           
          explicitly consented to the admission of the assignees as                   
          partners in MIL.  Our inquiry does not end there, however.  In              
          Kerr v. Commissioner, 113 T.C. 449 (1999), affd. on another issue           
          292 F.3d 490 (5th Cir. 2002), we demonstrated our willingness to            
          look beyond the formalities of intrafamily partnership transfers            
          to determine what, in substance, was transferred.  In that case,            
          also involving Texas partnership law, the taxpayers argued that             
          the interests they transferred to two grantor retained annuity              
          trusts (GRATs) were “assignee interests”6 because the other                 
          general partners of the partnership (the taxpayers’ adult                   
          children, whose trusts were the remainder beneficiaries of the              
          GRATs) did not consent to the admission of the GRATs as                     
          additional partners.  Id. at 464.  We found that such lack of               
          formal consent did not preclude a finding that the taxpayers                

               6  For purposes of this report, we use the term “assignee              
          interest” (assignee interest) to signify the interest held by an            
          assignee of a partnership interest who has not been admitted as a           
          partner in the partnership.                                                 




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