TaxNotes: Fifth Circuit Affirms Couple’s Liability for Gift Taxes (November 3, 2021)

Tax Notes has published an article on its website, titled “Fifth Circuit Affirms Couple’s Liability for Gift Taxes.” The article begins as follows:

Mary P. Nelson and James C. Nelson appeal from the Tax Court’s denial of their petition for a redetermination of a deficiency of gift tax issued by the Commissioner of Internal Revenue for the tax years 2008 and 2009. For the following reasons, we AFFIRM.

I. FACTS & PROCEDURAL HISTORY
Mary P. Nelson (“Mary Pat”) and James Nelson, a married couple with four daughters, sought to plan their estate. To that end, they formed a limited partnership, Longspar Partners, Ltd. (“Longspar”), in 2008. Mary Pat and James named themselves general partners of Longspar, each with a 0.5% general partner interest. The limited partners were Mary Pat and various trusts and accounts that had been established for the Nelsons’ daughters. The majority of Longspar’s assets were shares of stock in Warren Equipment Company, a holding company for several businesses founded by Mary Pat’s father.

As part of their estate plan, Mary Pat and James also formed a trust in 2008. Mary Pat was the settlor, James was the trustee, and James and the Nelsons’ daughters were the beneficiaries. In late 2008 and early 2009, Mary Pat transferred her limited partner interests in Longspar to the trust in two separate transactions — a gift and then a sale. The transfer agreement for the gift stated that:

[Mary Pat] desires to make a gift and to assign to [the trust] her right, title, and interest in a limited partner interest having a fair market value of TWO MILLION NINETY-SIX THOUSAND AND NO/100THS DOLLARS ($2,096,000.00) as of December 31, 2008 (the “Limited Partner Interest”), as determined by a qualified appraiser within ninety (90) days of the effective date of this Assignment.

Click here to see the full article: “Fifth Circuit Affirms Couple’s Liability for Gift Taxes”

Posted by Bennett Mansour, Associate Editor, Wealth Strategies Journal.

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