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respective assets contributed by the members were
properly credited to the respective capital accounts of
each contributing member, and distributions from WCB
Holdings required a negative adjustment in the
distributee member’s capital account. Most
importantly, we have found the presence of a legitimate
and significant nontax business reason for engaging in
this transaction. [Majority op. pp. 48-49; emphasis
added.]
Certainly, decedent’s state of mind (i.e., his intent) is
important in determining whether the ordinary-course-of-business
exception applies (was the transfer “free of any donative
intent”), but once it is determined that the transfer in question
was not made in the ordinary course of business, intent is no
longer relevant to the determination of whether the transfer was
for full consideration.
I also disagree with the implication of the majority opinion
that, in the context of a transfer to an entity (here, transfers
to both a limited liability company and a family limited
partnership), the full consideration requirement can be met by a
showing that the transferor received an entity interest (e.g., a
limited partnership interest) proportionate to the value of the
property contributed to the entity. While an inquiry as to
proportionality may have some bearing on whether the transfer was
in the ordinary course of business, within the meaning of section
25.2512-8, Gift Tax Regs. (e.g., was at arm’s length5), I fail to
5 I do not wish to suggest that proportionality (as
discussed in the text) is determinative that a transaction is at
(continued...)
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