- 20 - 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 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 notPage: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Next
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