family limited partnership

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family limited partnership (FLP)

A special type of limited partnership recognized by some states as an estate planning tool. A donor establishes a family limited partnership and then transfers into it property expected to appreciate in value over the years. The donor then makes gifts of small percentages of the partnership to children or other family members. The gifts are small enough to escape gift taxes and may be doubled if the donor makes the first gift to the spouse, and then each of them makes gifts each year.As the property grows in value,the appreciation belongs to the person receiving the gifted shares and so is not in the donor's estate at death.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
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The valuation principles articulated in Ahmanson are equally applicable to the valuation of interests in family limited partnerships with voting stock being analogous to a general partnership interest in a family limited partnership, and with nonvoting stock being analogous to a limited partnership interest.
Focus on Gifts Given Through Family Limited Partnerships
(2) Although the family limited partnership is an innovative use of existing laws regarding limited partnerships, it should always be established for legitimate business and non-tax estate planning purposes.
The use of a family limited partnership as an estate-planning
Velis had been leasing the property and building since its recent sale to the Uy Family Limited Partnership. The property sold for $2.4 million, according to the Whatcom County treasurer's office.
1060, 388, 754, 743, and 734 (the SSVS is not limited solely to these sections); determination of the value of a family limited partnership; consequences of discharge of indebtedness pursuant to IRC Sec.
(2) Although the IRS has asserted that a taxable gift can arise upon the contribution of capital to a family limited partnership, this argument was rejected where the partnership agreement allocated income and expenses on a pro rata basis based on the partners' contributions to the partnership.
In one of the scenarios, they demonstrated how gifting minority interests to the children, creating a family limited partnership to hold business real property, and doing a sales-and-leaseback of the principle residence provided a savings of $2 million dollars in death taxes to the heirs of a family-owned business.
The property sold for $3,700,000 to Janosz Family Limited Partnership of San Diego.
The family limited partnership must pass the "assignment-of-income principle" test to be treated as such.

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