FLP Discounts

Prof. Wendy Gerzog (University of Baltimore School of Law) has recently posted an article entitled Return to Senda: Order Determinative for FLP Discounts on SSRN.  The article was originally published in 110 Tax Notes 791 (2006).
   

Here is the conclusion:
   

Indeed, Jones provides a model for transferring assets to an FLP and thereafter gifting partnership interests, thereby maximizing the associated discounts. In contrast, Senda illustrates what happens when the taxpayers do not respect the formalities of an FLP as well as the required sequence of transfers and documentation. In fact, the Tax Court was uncertain whether the taxpayers’stock contributions ‘‘were ever reflected in their [own] capital accounts.’’  Otherwise, the transfer will likely be construed as an indirect transfer of property to the taxpayers’ children, thus denying the taxpayers those enviable discounts.