- 41 -
at 262. The court stated that the proper question in examining
the adequate and full consideration prong was whether the sale
depleted the gross estate. Id. (citing Wheeler v. United States,
116 F.3d 749, 759 (5th Cir. 1997)); see Estate of Frothingham v.
Commissioner, 60 T.C. 211, 215-216 (1973).
The Court of Appeals disagreed with the District Court’s
determination that a sale between members of the same family
cannot be a bona fide one. Kimbell v. United States, supra at
267. A transaction between family members is, however, subjected
to heightened scrutiny to ensure that it is not a sham or
disguised gift. Applying its test to the facts, the Court of
Appeals held in Kimbell that the pro rata partnership interest
the decedent received was adequate and full consideration. The
court also found that the decedent’s transfer met the bona fide
sale exception because the partnership was in actual possession
of the assets transferred, partnership formalities were
satisfied, she retained sufficient assets outside of the
partnership to meet her personal needs, some of the assets
contributed were active business assets, and she had nontax
business reasons for creating the partnership. Id. The nontax
business reasons included, among others, the protection of the
taxpayer from personal liability with regard to the oil and gas
properties contributed, the pooling of all of the decedent’s
assets to provide greater financial growth than splitting the
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