Raby & Raby on Business Purpose, Bona Fide Sale, and Family Limited Partnerships

Burgess J.W. Raby & William L. Raby have published Business Purpose, Bona Fide Sale, and Family Limited Partnerships, also available on the Tax Analysts web site as Doc 2005-5964, 2005 TNT 56-33.  Here is the Introduction:

In Business Purpose and Economic Substance in FLPs, Tax Notes, Jan. 1, 2001, p. 85, we wrote that while a family limited partnership (FLP) without a business purpose "may be ignored by the IRS for income tax purposes, . . . that lack of business purpose will not prevent an FLP from being given effect for transfer tax purposes and thus producing valuation discounts." That comment was based on Estate of Albert Strangi v. Commissioner, 115 T.C. 478 (2000). The first Strangi decision was hardly clear-cut, including an opinion, a concurring opinion, and three dissenting opinions. Now the Tax Court has compounded the confusion with another family limited partnership opinion, Estate of Wayne C. Bongard v. Commissioner, 124 T.C. No. 8 (2005), in which the majority concludes -- contrary to Strangi I -- that for estate tax purposes, there must be a legitimate and significant nontax reason for creating the family limited partnership. In addition to a majority opinion, the Bongard case had three other opinions -- one judge who concurred with only the result and not the reasoning (joined by another judge) and two judges who each wrote their own separate opinions concurring in part but dissenting in part, with still two other judges agreeing with one of those latter separate opinions.