Tax Court Continues to Crack Down on FLPs

by Dennis Stuchell 8. February 2012 08:45
A recent U.S. Tax Court case (Estate of Liljestrand) reminds us that proper planning is essential when forming a Family Limited Partnerhship (FLP).  The Court included the FLP assets in the estate and hit the taxpayer for an additional $2.5 million in estate taxes.  The Court stated a number of structural problems in their opinion such as failure to keep proper books and records, commingling of personal and FLP funds, and lack of a proper valuation. You can find more detail on Estate of Liljestrand in Trusts & Estates. This case is just one more demonstration of the importance of careful planning  and due diligence when your family's succession plan is at stake.  Be sure to choose proven valuation and tax professionals that are well qualified to assist with the critical task of transferring wealth to the next generation.
Categories: Advisory | Tax

$3.7 Billion in Valuation Discounts

by Dennis Stuchell 25. July 2011 09:09
“There were 102,608 gifts given in 2008 against which valuation discounts were taken,” reports IRS economist Melissa J. Belvedere in the recent IRS publication 2008 Gifts, “and the dollar value of these discounts totaled $3.7 billion.” Of the 234,714 returns filed for Gift Year 2008, the majority of the returns were nontaxable. A grand total of $40.2 billion was transferred to 927,554 recipients. Family trusts were the most commonly used vehicle to make indirect gifts. While the total nontaxable gifts dropped to the lowest point in the last three years, taxable gifts increased for the third year in a row. An interesting note is that men gave less cash as gifts compared to women, while men gave more stock as gifts then women. The majority of discounts exceeded 40% of the reported fair market value of the gifts. According to Belvedere “approximately 43.6% of discounted assets were stock, while real estate made up 21.1% of discounted assets.” Remember, the statistics are for 2008 gifts, and the IRS’s posture towards these discounts for gifts in 2009 and later might be different given the current U.S. deficit woes. Most gifts were given directly (69.1%, $27.8 billion) to children or grandchildren (48.9% and 24.7%, respectively), while gifts to other relatives or organizations totaled just 11.3%. Cash made up the largest share of total gifts at 46.3% ($14.2 billion) for nontaxable returns and 53.3% ($5.1 billion) on taxable returns.
Categories: Advisory