Pierre II: Effect on LLCs

Karyn Bybee Friske and Darlene Pulliam (both professors of accounting, West Texas A&M) recently published their article entitled Step Transaction Doctrine Collapses LLC Interest Gifts, Journal of Accountancy, Aug. 2010. An excerpt from the beginning is below:

In a second decision (Pierre II) involving Suzanne Pierre’s transfer of a single-member limited liability company (LLC) interest to two trusts, the Tax Court applied the step transaction doctrine to the gift and sale transactions at issue in the case and slightly reduced the lack-of-control discount. Previously, the court had ruled that the transfer of an interest in a single-member LLC should be valued for gift tax purposes as a transfer of an interest in the LLC rather than a transfer of its underlying assets, despite the fact that the LLC was a disregarded entity under the check-the-box regulations.

Special thanks to Jim Hillhouse (WealthCounsel) for bringing this to my attention.