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its managing powers to Mr. Gulig. The decedent died on October
14, 1994.
We determined that the formation of the SFLP was not an
arm’s-length transaction because Mr. Gulig, as the decedent’s
attorney-in-fact, established and operated SFLP without any
meaningful negotiations, essentially standing on both sides of
the transaction. Moreover, the Court determined that Mr. Gulig
recycled the value of the decedent’s assets through the
partnership or corporate solution since the decedent contributed
more than 99 percent of the total combined property in SFLP and
Stranco and received an interest with a value derived “almost
exclusively” from the assets he contributed rather than from a
true pooling of assets. None of the contributed assets were
found to be of the sort qualifying as a “functioning business
enterprise” as discussed in Estate of Harrison v. Commissioner,
T.C. Memo. 1987-8. Accordingly, in Strangi we held that the bona
fide sale exception was not satisfied.
Shortly thereafter, the Court in Estate of Stone v.
Commissioner, T.C. Memo. 2003-309, held that the bona fide sale
exception in section 2036(a) was satisfied. In Estate of Stone,
the decedent spouses (the Stones) had operated a successful
closely held business for a number of years and created five
family limited partnerships. We rejected the Commissioner’s
argument that the formation of each of the family limited
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