STRATEGEMS: Family Partnerships Revisited

McDevitt, Timothy J.
January 1994
Journal of Financial Planning;Jan1994, Vol. 7 Issue 1, p8
Academic Journal
The article discusses the benefits of family limited partnerships in the U.S. For a variety of reasons, including higher maximum income-tax rates and the recent ruling of the U.S. Internal Revenue Service concerning the valuation of family gifts of illiquid assets, the benefits available with family limited partnerships are even greater today. An example has been given in which parents own a $1 million asset in the form of an apartment house. The parents are interested in transferring portions of this real estate to their four children and four grandchildren consistent with the limits of the $10,000 annual gift-tax exclusion. The parents, however, have a concern, as they want to retain lifetime control. The parents transfer $1 million apartment house directly to a family limited partnership and in exchange, they receive 10 general partnership units and 90 limited partnership units. Even without taking advantage of discounts, the parents might choose to give each of the eight beneficiaries two limited partnership units each, that's the $160,000 they can transfer tax free. Hence, the parents remain in control as the sole general partners, even though their ownership may represent an equity interest as small as one percent.


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