Federal Tax

Wealth Planning with Family Limited Partnerships and Limited Liability Companies (Portfolio 722)

  • This Portfolio discusses income and transfer tax considerations and nontax considerations regarding the formation, operation, and termination of family limited partnerships and LLCs.

Description

Bloomberg Tax Portfolio, Wealth Planning with Family Limited Partnerships and Limited Liability Companies, No. 722, covers the following topics:

  • Income and transfer tax considerations and nontax considerations relating to the formation, operation and termination of family limited partnerships and limited liability companies (LLCs).
  • The goals of family members in establishing limited partnerships and LLCs.
  • The various techniques available for reducing or eliminating transfer taxes, and the income tax rules pertaining to the recognition of an entity as a partnership for federal income tax purposes.
  • Valuation issues, including the various discounts or premiums that may apply to transfers of interests in limited partnerships and LLCs and the special valuation rules under Chapter 14 as they apply to family limited partnerships and LLCs.
  • The validity of a partnership or LLC formed for the purpose of holding marketable securities and the Internal Revenue Service’s challenges to valuation discounts.
  • The availability of the annual exclusion for transfers of interests in family limited partnerships and LLCs and the potential inclusion of transferred interests in the transferor’s estate.
  • The issues involved in choosing the appropriate entity for holding family assets, including marketable securities, real estate, and operating businesses with a detailed discussion of the desired characteristics of the family business entity.
  • The issues involved in forming and liquidating the entity, including the potential application of the anti-abuse regulation under the partnership rules, tax-free formation treatment, and classification of the entity for federal tax purposes.
  • The issues that should be considered when drafting the limited partnership agreement or operating agreement.
  • The business and other nontax reasons for a family to use a limited partnership or LLC to hold family investments and operating businesses.

Table of Contents

I. Introduction
II. Family Limited Partnerships and Limited Liability Companies for Income Tax Purposes
III. Valuation Issues for Family Limited Partnerships and Limited Liability Companies: In General
IV. Special Valuation Rules Applicable to Family Limited Partnerships and Limited Liability Companies Under Chapter 14 of the Code
V. Other Transfer Tax Issues Involved with Family Limited Partnerships and LLCs
VI. Choice of Entity
VII. Formation and Liquidation Issues for Family Limited Partnerships and Limited Liability Companies
VIII. Drafting Considerations for Family Limited Partnerships and Limited Liability Companies
IX. Business and Other Nontax Reasons for Using Family Limited Partnerships and Limited Liability Companies

Louis Mezzullo
Consulting Partner
Withersworldwide
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