In short
In a family limited partnership, parents contribute assets to a partnership, keep the general partner interest and give limited partner interests to their children, often at a discount to the underlying asset value.
Key takeaways
- Discounts for lack of control and lack of marketability reduce the gift and estate tax value of the interests.
- The Internal Revenue Service can pull the assets back into the estate if the parents keep control or the benefit of the assets, or the partnership lacks a non-tax purpose.
- Formalities such as separate accounts and pro rata distributions matter.
Where it's tested
TCP: Estate & Gift Tax Planning — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Valuation discounts for a minority interest in a closely held business reflect: