- 26 -
reported on the Schedules K-1 never reflects decedent’s trust’s
contribution of the Padaro Lane property. The Bigelows did not
comply with all of the terms of the partnership agreement. These
facts suggest that the sale was not in good faith.
3. No Potential for Nontax Benefit to Decedent
The transfer did not provide and had no potential to provide
any nontax benefit to decedent because management of the assets
did not change as a result of the transfer and there was no
pooling of assets. A transfer of assets is not a bona fide sale
for estate tax purposes unless the transfer provides the
transferor some benefit other than estate tax savings. See
Estate of Thompson v. Commissioner, 382 F.3d 367 (3d Cir. 2004);
Estate of Harper v. Commissioner, supra.
The estate contends that transferring the Padaro Lane
property to the limited partnership had three nontax purposes.
First, the estate contends that one of those purposes was to
provide legal protection from creditors. We disagree.
Transferring the Padaro Lane property to Spindrift did not give
decedent’s trust any additional protection from creditors because
decedent’s trust was the sole general partner. As a general
partner, decedent’s trust was not protected from liability
arising from the ownership of the property. Limiting the
liability of decedent’s trust was not a purpose for forming the
partnership and transferring the Padaro Lane property to it.
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011