Limited partners (LPs) of family limited partnerships (FLPs) have long been a powerful estate-planning tool. LPs of FLPs can take a discount of as much as 75 percent for both estate and gift tax purposes, attributed to a lack of marketability and control and a fractional interest in an FLP.1 But someone who inherits a partnership share in an FLP can face a huge disparity between his inside and outside basis in the partnership's assets. This disparity could result in increased capital gains ...

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