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transferred assets).3 In exchange, Austin and Edna received a
98-percent limited partnership interest. Austin and Edna then
gave 24.5-percent limited partnership interests to irrevocable
trusts created for each of their four sons. Approximately 90
percent of the transferred assets had been held by Austin and
Edna in joint tenancy. The remaining 10 percent had been held by
Austin individually or in joint tenancy with his sons. As a
result, Austin contributed 58.46 percent of KPLP’s assets, Edna
contributed 38.26 percent of KPLP’s assets, Austin and Edna’s
sons contributed 1.28 percent of KPLP’s assets, and the living
trust contributed 2 percent of KPLP’s assets. After the
transfers to the living trust and KPLP, Austin and Edna did not
have any bank accounts open in their own names.
For 1995, Austin and Edna filed identical Forms 709, U.S.
Gift Tax Return, reporting gifts of 24.5 percent of KPLP’s
limited partnership interests and 24.75 percent of Crane
Properties’ limited partnership interests to each of their sons’
irrevocable trusts. The gift tax returns reported the gifts as
split gifts; they were given half from each of Austin and Edna.
The gift tax returns also applied a 43.61-percent discount to the
value of the transferred KPLP interests because the interests
were minority interests and lacked management control. The KPLP
3In 1994, the Korbys reported income from these assets of
$75,429.
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