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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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