James C. Nelson v. Commissioner, T.C. Memo 2020-81 (June 10, 2020), a donor transferred limited partnership interests equal to percentage interests that were calculated by an appraiser following a gift and a sale to a trust. The limited partnership’s primary asset was common stock of a family-owned holding company. The holding company owned 100 percent of seven operating subsidiaries.
The donor made two transfers of limited partnership interests to the trust created for her children and husband. The first transfer was a gift that was described in a memorandum of gift as having a fair market value of $2 million as of the date of the gift, as determined by an appraiser within 90 days of the effective date of the assignment. The second transfer was structured as a sale, and was memorialized by a memorandum of sale as having a value of $20 million as determined by an appraiser within 180 days of the effective date of the assignment. An appraiser concluded that the transfers were equal to 6.14 percent and 58.65 percent limited partnership interests, respectively.
A dispute arose over whether the donor transferred limited partnership interests equal to fixed dollar amounts or percentage interests. The Tax Court determined that to decide this, the transfer documents and not subsequent events controlled.
Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.