Why Section 2036(a)(2) Shouldn't Apply to FLPsWhy Section 2036(a)(2) Shouldn't Apply to FLPs

Angelo F. Tiesi, partner, Kirkland & Ellis LLP, Chicago

Internal Revenue Code Section 2036(a)(2) includes in a decedent's gross estate the value of transferred property (except in the case of a bona fide sale for full and adequate consideration) in which a decedent has retained “the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom.” Historically, the courts and the Internal Revenue Service have applied this section to trusts over which a deceased grantor retained the right, as trustee or otherwise, to control distributions of trust income or principal.¹ However, the significant differences between partnerships and trusts make Section 2036(a)(2) ...