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Family partnerships are commonly used for business, tax, and estate planning purposes. The IRS, however, has challenged the use of family limited partnerships and LLCs to reduce the value of the underlying partnership property for transfer tax purposes. The recent taxpayer victory in Estate of Mirowski is a reminder that proper drafting, funding, and operation of a family partnership or LLC can make it capable of withstanding these attacks and obtaining significant tax benefits for its partners. In this discussion, Estate Planning for Interests in Family Entities after Mirowski, Louis A. Mezzullo reviewed the tax benefits and traps of family limited partnerships and LLCs, including: - The nature of the discounts claimed for transfers of interests in family entities.
- The estate and gift tax rules applicable to transfers of family entity interests, with a special emphasis on Chapter 14.
- IRS attempts to limit or deny discounts for the transfer of such interests, including use of IRC §2036(a) to ignore the family entity, thereby eliminating the discounts.
- An explanation of Estate of Mirowski, describing how the taxpayers were able to overcome IRS arguments under §2036(a).
- How the lessons of Mirowski can be used to organize and operate a family entity that will better withstand IRS challenge.
Recorded on October 9, 2008, this audio event is available on CD for purchase.
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