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rationale (majority opinion’s rationale):
The decedent did not need the membership interest
in WCB Holdings class B shares to continue his
lifestyle. However, decedent retained ownership of
over 91 percent of his BFLP interest and did not make
gifts of such interest prior to his death. More
importantly, decedent controlled whether BFLP could
transform its sole asset, the class B WCB Holdings
membership units, into a liquid asset. Decedent as CEO
and sole member of Empak’s board of directors
determined when Empak redeemed its stock in each of the
seven instances of redemptions prior to his death,
including the last redemption of about $750,000 worth
of Empak stock in 1998 after WCB Holdings was formed.
None of the seven redemptions reduced the membership
units owned by BFLP. In order for BFLP to be able to
diversify or take any steps other than simply holding
the class B membership units, decedent would have had
to cause the membership units and the underlying Empak
stock to be redeemed. He chose not to do this. By not
redeeming the WCB membership units held by BFLP,
decedent insured that BFLP would not engage in asset
management. Thereby, decedent exercised practical
control over BFLP and limited its function to simply
holding title to the class B membership units. Whether
decedent caused the WCB membership units held by BFLP
and the underlying Empak stock to be redeemed or not,
his ability to decide if that event would occur
demonstrates the understanding of the parties involved
that decedent retained the right to control the units
transferred to BFLP.
The estate’s argument that the general partner’s
fiduciary duties prevents a finding of an implied
agreement is overcome by the lack of activity following
BFLP’s formation and BFLP’s failure to perform any
meaningful functions as an entity. We conclude that
decedent’s transfer to BFLP for a 99-percent ownership
interest in the partnership did not alter his control
of the WCB Holdings class B membership units
transferred to BFLP. See Estate of Thompson v.
Commissioner, 382 F.3d 367, 376-377 (finding “nothing
beyond formal title changed in decedent’s relationship
to his assets” where the practical effect on his
relationship to the transferred assets during
decedent’s life was minimal).
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