-39-
estate planning scheme. The estate planning nature of the LRFLP
is further revealed when we view the specific manner in which the
LRFLP was formed. Feldman established the terms of the LRFLP
without talking to any of the partners, and he set each partner’s
contribution to capital by first valuing decedent’s assets and
her contribution to capital and then calculating all of the
remaining numbers on the basis of his initial calculation.19 As
he testified:
I knew how much Lillie Rosen was putting in. That
represented 99 percent, so I used, you know, an
algebraic formula to determine what additional 1
percent would consist of. So basically I took the
value of her—-of Lillie Rosen’s contribution and
divided it by 99 percent, and came up with a total
value of the partnership to equal 100 percent. Then I
subtracted Lillie Rosen’s contribution to come up with
the 1 percent interest, and then I divided that in two.
They each put in half of 1 percent.
Notwithstanding the incredible subjective expressions of
contrary intent espoused at trial by individuals connected with
the LRFLP, the objective facts in the record support our
conclusion that the transfer of decedent’s assets to the LRFLP
was not a bona fide sale. First, the LRFLP was not engaged in a
valid, functioning business operation, and the LRFLP served no
legitimate or significant nontax purpose; it operated simply as a
19 While Feldman testified that he consulted with decedent’s
son and other “family members” before forming the LRFLP, we find
that he spoke only to decedent’s son-in-law. Indeed, decedent’s
son testified that he did not remember ever meeting Feldman and
that the only time that he may have spoken to Feldman was after
decedent’s funeral.
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