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relationship to the properties allegedly transferred to the
partnership was altered.
In the context of family limited partnerships, the bona fide
sale for adequate and full consideration exception is met where
the record establishes the existence of a legitimate and
significant nontax reason for creating the family limited
partnership, and the transferors received partnership interests
proportionate to the value of the property transferred. See,
e.g., Estate of Stone v. Commissioner, supra; Estate of Harrison
v. Commissioner, supra. The objective evidence must indicate
that the nontax reason was a significant factor that motivated
the partnership’s creation. See Estate of Harper v.
Commissioner, T.C. Memo. 2002-121; Estate of Harrison v.
Commissioner, supra. A significant purpose must be an actual
motivation, not a theoretical justification.
By contrast, the bona fide sale exception is not applicable
where the facts fail to establish that the transaction was
motivated by a legitimate and significant nontax purpose. See
Estate of Hillgren v. Commissioner, supra; Estate of Thompson v.
Commissioner, supra; Estate of Harper v. Commissioner, supra; see
also Estate of Reichardt v. Commissioner, 114 T.C. 144 (2000). A
list of factors that support such a finding includes the taxpayer
standing on both sides of the transaction, Estate of Hillgren v.
Commissioner, supra; the taxpayer’s financial dependence on
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