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transferred, and partnership legal formalities were respected.
We rejected the Commissioner’s argument that valuation discounts
attached to the partnership interest the decedent received
precluded the adequate and full consideration prong from being
satisfied. We reasoned that the Commissioner’s argument
effectively read “out of section 2036(a) the exception that
Congress expressly prescribed when it enacted that statute”. We
found that the partnerships had economic substance as a joint
venture for profit in which there was a genuine pooling of
property and services.
This Court had another opportunity to consider the
application of section 2036(a) and the bona fide sale exception
in Estate of Hillgren v. Commissioner, T.C. Memo. 2004-46. The
decedent’s estate argued that the creation of the limited
partnership was motivated by a business purpose and premarital
protection of the decedent’s assets. The Court rejected the
estate’s contention that the partnership served as a means of
premarital asset protection. On that point, the Court determined
that because title to the properties remained in the decedent’s
name until after her death, and she was financially dependent on
the distributions from the partnership, the transaction was not a
bona fide sale, but rather was a paper transaction. The estate
was unable to establish a credible nontax reason for engaging in
the transaction, nor was it able to explain how the decedent’s
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