ESTATE TAXES
Family limited partnerships can be used to reduce estate taxes. But they need to be established for reasons other than the tax savings to work for tax purposes, the Tax Court says. A father who set up one with his son and trusts for his grandkids passed that test. All of the parties transferred stock in the father’s employer to an LLC and took back proportionate interests in it.
Although estate tax savings via a discount for a partial LLC interest were discussed, the main reasons for the transfers were to keep the grandkids from selling their stock and to keep the shares at bay from the son’s spouse, whom the son later divorced. Keeping the block of stock intact let's the family maintain a seat on the firm’s board. The IRS’ attempt to tax the stock’s full value fails (Est. of Black, 133 TC No. 15).
Family limited partnerships can be used to reduce estate taxes. But they need to be established for reasons other than the tax savings to work for tax purposes, the Tax Court says. A father who set up one with his son and trusts for his grandkids passed that test. All of the parties transferred stock in the father’s employer to an LLC and took back proportionate interests in it.
Although estate tax savings via a discount for a partial LLC interest were discussed, the main reasons for the transfers were to keep the grandkids from selling their stock and to keep the shares at bay from the son’s spouse, whom the son later divorced. Keeping the block of stock intact let's the family maintain a seat on the firm’s board. The IRS’ attempt to tax the stock’s full value fails (Est. of Black, 133 TC No. 15).
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