Family Limited Partnerships and Limited Liability Companies (Portfolio 812)
This Portfolio covers income and transfer tax and nontax considerations regarding family limited partnerships and limited liability companies (LLCs) formation, operation and termination.
Tax Portfolio, Family Limited Partnerships and Limited Liability Companies, No. 812-3rd, discusses 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 Portfolio includes a general discussion of 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.
The Portfolio explores valuation issues, including the various discounts or premiums that may apply to transfers of interests in limited partnerships and LLCs. It discusses 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 Portfolio also covers the special valuation rules under Chapter 14 as they apply to family limited partnerships and LLCs. The Portfolio discusses 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 Portfolio examines the issues involved in choosing the appropriate entity for holding family assets, including marketable securities, real estate, and operating businesses. It contains a detailed discussion of the desired characteristics of the family business entity. The Portfolio covers 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 Portfolio contains a discussion of the issues that should be considered when drafting the limited partnership agreement or operating agreement.
Finally, the Portfolio discusses business and other nontax reasons for a family to use a limited partnership or LLC to hold family investments and operating businesses.
This Portfolio may be cited as Mezzullo, 812-3rd T.M., Family Limited Partnerships and Limited Liability Companies.
Table of Contents
II. Recognition of Family Partnerships and LLCs for Income Tax Purposes
III. Valuation Issues: In General
IV. Special Valuation Rules
V. Other Transfer Tax Issues
VI. Choice of Entity
VII. Formation and Liquidation Issues
VIII. Drafting Issues
IX. Business and Other Nontax Reasons for Using Limited Partnerships and LLCs