Dec 1, 2009 12:00 PM

, By N. Todd Angkatavanich & Edward A. Vergara

Four key taxpayer victories involving family limited partnerships show us how this battle with the IRS might be won

By N. Todd Angkatavanich & Edward A. Vergara

Estate and gift tax valuation positions associated with family limited partnerships (FLPs) often are challenged by the Internal Revenue Service and somewhat unpredictably adjudicated by the courts. But in the last two years, taxpayers have won four key victories — starting with the Mirowski case in 2008 and continuing with the Miller, Keller and Murphy cases in 2009 — in which estates were able to prevail against the IRS challenges of FLPs because the bona fide sale exception to Internal Revenue Code Section 2036 had been satisfied.¹ These cases represent a new trend because the consistency of their themes provides some further insight into the circumstances under which FLP planning has the greatest chance of withstanding a challenge by the IRS.

Indeed, this “quadrilogy”² of FLP cases underscores the fact that practitioners structuring FLPs must keep in mind that: