Tax Court’s FLLP Mirowski case analyzed

Prof. Wendy Gerzog (Professor of Law, University of Baltimore School of Law) has recently posted on SSRN her article entitled Tax Court FLP Confusion: Mirowski.

Here is the abstract of her article:

The article critiques the Tax Court’s latest family limited partnership case, Mirowski, as well as the court’s Bongard test, which is applied to determine whether or not an FLP falls within the bona fide sales exception of section 2036.

Prof. Gerzog concludes that:

The inadequacy of the Bongard test is the lack of a clear standard to separate those cases that exemplify bona fide sales for adequate and full consideration in money or money’s worth and those that fall under the general prohibitions of section 2036. Mirowski represents the failure of that test. The Tax Court in Mirowski did not explain why the factors that the court found cogent in cases such as Erickson under the Bongard criteria were not significant in Mirowski. Instead, the court merely states that Mirowski is different without explaining that divergence. Specifically, the court did not elucidate why Mirowski’s desire to have her children and their issue ‘‘work together as a family’’ is any different from every other case involving a family LLC or an FLP. To state conclusions without addressing distinctions, if there are any, not only is not helpful, but also indicates capriciousness in an area of estate planning already rife with abuse.

Prof. Gerzog’s article also appears in Tax Notes, Vol. 120, No. 3, 2008.