Estate of Austin Korby - Page 19

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          passive nature of transferred assets is generally not                       
          determinative in a section 2036 analysis of their transfer to a             
          family limited partnership, we believe the lack of activity by              
          Austin with respect to the KPLP assets is relevant to the issue             
          of whether the payments the living trust received from KPLP were            
          management fees.                                                            
               All these facts, taken together, show that Austin and Edna             
          had an implied agreement with their sons that Austin and Edna               
          were entitled to the income from the assets they transferred to             
          KPLP.  KPLP was formed as a testamentary vehicle designed to                
          transfer Austin’s and Edna’s assets to their sons during their              
          lives at a significant discount, while retaining for Austin and             
          Edna the economic enjoyment of those assets.                                
               B.   The Bona Fide Sale Exception                                      
               Having concluded that Austin and Edna retained the enjoyment           
          of and right to income from the assets they transferred to KPLP,            
          we must now determine whether section 2036 is nonetheless                   
          inapplicable as a result of the bona fide sale exception.  We               
          recently held in Estate of Bongard v. Commissioner, 124 T.C.    ,           
          ___ (2005) (slip. op. at 39), that in the context of family                 
          limited partnerships, the bona fide sale exception is met where             
          the record establishes the existence of a legitimate and                    
          significant nontax reason for the transfer, and the transferors             
          received partnership interests proportionate to the value of the            

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