Estate and Elder Law

Discounted Gifts

One may transfer traded securities to a partnership and then gift partnership interests and pay less gift tax then if the securities were gifted outright due to allowable discounts for lack of marketability and minority interests in the partnership.

Parents created a limited partnership and funded it with common stock of a traded security and then gifted the limited partnership shares to their children.  The partnership interest to the children were discounted because of lack of marketability and they represented a minority interest.  However, the discounts allowed were less then those sought because the court disallowed a reduction of the transfer due to restrictions contained in the partnership agreement due to the limitations imposed by Section 2703 of the Code.  It had to do with limitations on the ability to dispose of the interest where families are involved.

While the parents were not successful in getting the full discounts they sought, they nonetheless saved on gift taxes by giving the children partnership interests rather then gifting the stock outright.  Holman v. Commissioner, 601 F.3d 763 (8th Cir. 2010).