Another ‘bad facts’ FLP case reminds analysts: Check third-party assumptions of value

BVWireIssue #58-2
July 11, 2007

The U.S. Tax Court just issued yet another opinion involving “bad facts” and the formation of a family limited partnership (FLP).  In Estate of Gore (June 27, 2007), the children of an aging, wealthy widow (on advice of a CPA and legal counsel) formed an FLP with themselves as general partners.  But the FLP held no title to anything but a bank account, was never fully capitalized until after the widow’s death, and had been used for the widow (and children’s) support during her lifetime.  “The estate planning on behalf of…the decedent reflects a remarkable and persistent pattern of informality and inaction,” the Tax Court observed, making its 74-page findings a long but not surprising read.

The decision also mentions an “informal valuation opinion letter” accompanying the widow’s gift tax return, which included “an adjusted aggregate nonmarketable and noncontrolling” value for the FLP.  “Seems appraisers should now look carefully on the assumptions of value provided by attorneys, CPAs, and other third parties,” especially in light of the new IRS penalty provisions, comments Owen Fiore ( (who has some knowledge of all that entails).  In this month’s (July) BVU, Fiore looks at ten years of FLP case law and the challenges appraisers now face in helping attorneys, advisors, and clients to preserve the continued viability of these estate-planning entities through a “team” approach.

New *free* download:  And we’ve just added the IRS’ most recent FLP settlement guidelines to the free valuation downloads at

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