Implied agreement triggered estate inclusion of FLP assets.

• Author: Sherr, Eileen
• Position: Family limited partnership

In two related cases, Est. of Austin Korby, TC Memo 2005-103, and Est. of Edna Korby, TC Memo 2005102, the Tax Court held that the fair market value of assets a husband and wife transferred to a family limited partnership (FLP) were includible in their respective estates under Sec. 2036(a)(1), because the facts surrounding the transfer, and the parties' subsequent actions, pointed to an implied agreement to renjoyment of the income from the property.

Facts

The taxpayers, who were in poor health, transferred almost all of their assets (except for their personal residence and a few other assets) to a FLP. In turn, the FLP paid many of the taxpayers' personal expenses (e.g., utility, insurance and property tax bills) and made significantly disproportionate distributions to them. The Tax Court found these facts evidenced an implied agreement for the transferors to retain enjoyment of the income from the property.

Abraham

In another recent case, Est. of Ida Abraham, 5/25/05, the First Circuit, affirming the Tax Court (TC Memo 2004-39), held...