-37-
Petitioners assert as to the first prong that the LRFLP
was formed for four legitimate and significant nontax
purposes, beyond estate tax savings: (1) to protect
the decedent’s assets during her lifetime, and,
ultimately, to provide limited liability protection to
the donees of the limited partnership interests; (2) to
create giftable assets that preserve value and cannot
be easily liquidated in the short-term, (3) to
facilitate Decedent’s annual gifting program to her
family; and (4) to provide for the common management of
the LRFLP’s assets during the decedent’s lifetime and
after her death.
The credible evidence at hand does not support this assertion to
the extent that it relates to forming the LRFLP for a reason
other than the avoidance of Federal estate (and gift) tax.18 As
an initial matter, petitioner’s issues memorandum lists only the
following reason for forming the LRFLP: “[T]o have a family
business of making, protecting, enhancing, and investing in the
partnership’s assets. This included trading, acquiring,
disposing or investing in securities on behalf of the
partnership’s partners.” In order to qualify as a “legitimate
and significant nontax reason” within the meaning of Estate of
Bongard v. Commissioner, supra at 118, we must find that the
reason was an important one that actually motivated the formation
of that partnership from a business point of view. See id. The
18 Petitioners concede on brief that the LRFLP was formed to
reduce the value of decedent’s gross estate for Federal estate
tax purposes and to avoid paying Federal estate tax on the amount
of the reduction.
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