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Infolawyer, Attorney
Category: Estate Law
Satisfied Customers: 56542
Experience:  Licensed attorney helping individuals and businesses.
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I need an estate tax lawyer familiar with family limited

Customer Question

I need an estate tax lawyer familiar with family limited partnerships that have the purpose of transferring real property through gifts to avoid inclusion in an estate
Submitted: 8 months ago.
Category: Estate Law
Expert:  Infolawyer replied 8 months ago.

Hello and welcome. I am working on your answer and will be right back!

Expert:  Infolawyer replied 8 months ago.

what can I answer for you about this?

Customer: replied 8 months ago.
Real estate worth approximately $800,000 is owned by a family limited partnership set up in 1994 by my parents. Through annual gifting less than the exclusion amounts, they transferred most ownership to my 2 brothers, myself and my son, the intended final heir. The terms of the partnership do not allow any general shares to be transferred to the third generation, until the second is all dead and the partnership terminates. In 1998 one brother and sister sold all but 1 limited share to the other brother, who has since tranferred limited shares to the thrid generation. However, that brother and my mother own the only general shares, no gift tax returns have been filed that show the transfer, and the donee has no control or ability to sell any of the property. In reading up on estate taxes in 2012 I saw that the IRS was disallowing such "gifts" as they are not really gifts unless gift tax returns had been filed and the 3 year limitation had passed, thereby adding the property back into the estate of the donor. In this case the brother who is the donor has considerably more estate than the exclusion, therefore it would be subject to estate tax. The original donor (our mother) did not file any returns, and does not have a large estate, so if the "gifts" are no longer recognized by the IRS, I wonder if it should all revert to the original partner, in this case the mother.
Customer: replied 8 months ago.
Am I still waiting for a phone call or reply?
Expert:  Infolawyer replied 8 months ago.

where the transfer is not recognized, it would revert back.

Customer: replied 8 months ago.
That is not a detailed answer. I want to know if the transfer is recognized or not, and to what would it revert back?
Expert:  Infolawyer replied 8 months ago.
Glad to elaborate. As mentioned it reverts back to the grantor of the voided transfer. If a minor or deceased to the guardian of estate respectively.
Customer: replied 8 months ago.
But my question is, is this a voided transfer? If so, I need the IRS ruling which spells it out.And, if this is a voided transfer, does it revert back to the original owner, the mother? Or was there a grandfather clause?
Expert:  Infolawyer replied 8 months ago.
From your facts it's voidable as a violation of the terms of the trust as opposed to an IRS code.
Customer: replied 8 months ago.
Not at all, there are provisions in the partnership agreement that allow everything, and even specify the above intent. There is no trust involved here. The question boils down to transfers by gift of property within the family limited partnership, and are those gifts recognized as gifts by the IRS? Or has there been a court case in which the IRS won, and disputes that these are, indeed, gifts?
Expert:  Infolawyer replied 8 months ago.
Transfers within a partnership have not been challenged as gifts.
Customer: replied 8 months ago.
Thank you
Expert:  Infolawyer replied 8 months ago.

very welcome.