After losing ground in FLPs, the IRS is still fighting defined-value clauses

The 5th Circuit’s recent ratification of substantial valuation discounts applied to a family limited partnership (FLP) in Keller v. United States teaches some valuable lessons, said attorney John Porter (Baker Botts), in part I of BVR’s Online Symposium on Estate and Gift Tax. Specifically, it’s never too late to start the estate planning process. Even if the formation is incomplete by the time of the decedent’s death, the partnership may still exist under applicable state laws, sufficient to preserve its discounted asset values. To make sure, Porter said, “it is critical that estate planners—lawyers and appraisers—document the transferor’s intentions and all steps taken to effect the partnership formation and funding diligently.”

Another issue that bears a close watch: Even though the Tax Court “resoundingly” rejected the IRS’s arguments against asset transfers using defined-value clauses in Wandry v. Commissioner, the agency has taken the case to the U.S. Court of Appeals for the 10th Circuit. Stay tuned …

And save the date. Join William Frazier (HFBE) and Ashok Abbott (Business Valuation, LLC) on November 8 for Part II of BVR’s Online Symposium on Estate and Gift Tax as they discuss the Non-marketable Investment Company Evaluation Method.