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commercial and personal injury liability resulting from their
bridge-building business, as well as liability arising from
divorce. The estate points to provisions in the KPLP agreement
that prevented any partner from unilaterally forcing a
distribution of partnership property and restricted transfer of
the limited partnership interests. However, the estate has not
shown that the terms of the KPLP agreement would prevent a
creditor of a partner from obtaining that partner’s KPLP interest
in an involuntary transfer. The limited protection KPLP gave the
family and the other evidence in the record lead us to believe
that credit protection was not a significant reason for forming
KPLP; rather, Austin and Edna formed KPLP in order to make a
testamentary transfer of their assets to their sons at a
discounted value while still having access to the income from
those assets for their lifetime. Instead of retaining assets
sufficient to provide the income they would need as their medical
expenses grew, Austin and Edna used KPLP in an attempt to
insulate all of their income-producing assets from the estate
tax. As a result, we find that the transfer of Austin’s and
Edna’s assets to KPLP was not a bona fide sale for full and
adequate consideration. Therefore, section 2036(a)(1) applies to
the KPLP assets that were contributed by Austin and Edna. Given
this conclusion, we need not address respondent’s argument for
inclusion under sections 2036(a)(2) and 2038.
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