Turn(er)ing the Tables on TaxpayersTurn(er)ing the Tables on Taxpayers
The IRS’ most recent attack on partnerships hints at the marital deduction mismatch
As the Internal Revenue Service increases its efforts to deprive taxpayers of the potential tax benefits that family limited partnerships (LPs) can offer, a pattern of issues raised by the IRS has emerged. In recent cases, the IRS has focused on whether Internal Revenue Code Section 2703 applies to disregard rights of first refusal and buy-sell provisions when determining the value of a partnership interest that was transferred. The IRS also typically argues that the fair market value (FMV) of partnership interests reported on various transfer tax returns is too low—that the valuation discounts applied were too aggressive or weren’t applicable.
In the gift tax context, the IRS has focused on whether gifts of partnership interests can qua...
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