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Justifying FLPsJustifying FLPs
Since the early 1990s, use of the investment family limited partnership (FLP)1 as a sophisticated estate-tax reduction technique has grown. Almost universally, the Internal Revenue Service asserts in these situations that a valuation discount should not be permitted because the investment FLP has no real investment purpose and therefore no economic substance apart from estate-tax savings. The IRS
Louis S. Harrison, partner, Harrison & Held, Chicago, and John M. Janiga, professor, School of Bu
Since the early 1990s, use of the investment family limited partnership (FLP)1 as a sophisticated estate-tax reduction technique has grown. Almost universally, the Internal Revenue Service asserts in these situations that a valuation discount should not be permitted because the investment FLP has no real investment purpose and therefore no economic substance apart from estate-tax savings. The IRS employs this argument to pave the way for courts to be more liberal in their statutory applications to invalidate the FLP. As more cases have entered the Tax Court queue with fact patterns that have what the IRS and the Tax Court view as questionable...
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