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full consideration in money or money’s worth”. The exception
aims to exclude from the reach of Federal estate and gift taxes
transfers in which a decedent received consideration sufficient
to protect against depletion of the estate’s assets. See Estate
of Magnin v. Commissioner, 184 F.3d 1074, 1079 (9th Cir. 1999),
revg. on other grounds T.C. Memo. 1996-25. The estate argues
that the transfer of decedent’s assets to RLP in exchange for the
entire interest in RLP was a “bona fide sale” for which decedent
received adequate and full consideration and, hence, that section
2036(a) does not apply here. We disagree. The transfer of
decedent’s assets to RLP in exchange for the entire interest in
RLP was not “a bona fide sale for an adequate and full
consideration” within the meaning of section 2036(a).
First, the formation of RLP entailed no change in the
underlying pool of assets or the likelihood of profit. Without
such a change or a potential for profit, decedent’s receipt of
the partnership interests does not constitute the receipt of full
and adequate consideration. See Estate of Bongard v.
Commissioner, 124 T.C. 95, 128-129 (2005); see also Estate of
Bigelow v. Commissioner, 503 F.3d 955 (9th Cir. 2007).
Second, to constitute a bona fide sale for adequate and full
consideration, decedent’s transfer of the assets to RLP must have
been made in good faith. See sec. 20.2043-1(a), Estate Tax Regs.
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