Gross v. Commissioner Analyzed

Prof. Wendy Gerzog (Professor of Law, University of Baltimore School of Law) has recently posted on SSRN her article entitled Gross: FLP Sequence and its Consequence analyzing Gross v. Commissioner, T.C. Memo. 2008-221, in which the taxpayer made gifts of stock to her children through an FLP.

Here is the conclusion of her article:

With its findings regarding the timing of the formation of the FLP and the taxpayer’s stock transfers, as well as the taxpayer’s adherence to making proper adjustments to the partners’ capital accounts to reflect their own contributions, it is not surprising that the Tax Court in Gross held that the taxpayer transferred FLP interests to her daughters and did not make indirect gifts of stock to them. The case, in its rejection of the step transaction doctrine, mirrors the court’s recent Holman decision. The court emphasizes once again that the brief period between the taxpayer’s contribution of stock to the partnership and her gifts of FLP interests to her children is sufficient when, because of the volatile nature of the securities, there is a ‘‘real economic risk’’ of valuation fluctuation during that time frame.