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property transferred. See, e.g., Estate of Thompson v.
Commissioner, 382 F.3d 367 (3d Cir. 2004), affg. T.C. Memo. 2002-
246; Kimbell v. United States, 371 F.3d 257, 258 (5th Cir. 2004).
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, T.C. Memo. 1987-8. A significant
purpose must be an actual motivation, not a theoretical
justification.
The facts and circumstances of each case must be examined in
order to determine whether the bona fide sale exception has been
met. Certain factors indicate that a bona fide sale has not
occurred. Factors that support a finding that a sale was not
bona fide are: (1) The taxpayer’s standing on both sides of the
transaction, Estate of Hillgren v. Commissioner, T.C. Memo. 2004-
46; (2) the taxpayer’s financial dependence on distributions from
the partnership, Estate of Thompson v. Commissioner, supra;
Estate of Harper v. Commissioner, supra; (3) the partners’
commingling of partnership funds with their own, Estate of
Thompson v. Commissioner, supra, and (4) the taxpayer’s failure
to actually transfer the property to the partnership, Estate of
Hillgren v. Commissioner, supra.
Austin formed KPLP with the help of his estate lawyer but
without the involvement of his sons, who were each to be 24.5-
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