IRS's current position on FLPs.

• Author: Packard, Pamela
• Position: Family limited partnerships

Mary Lou Edelstein, the IRS National Coordinator for Family Limited Partnerships (FLPs) at the Office of Appeals (Appeals), spoke to the AICPA Tax Division's Trust, Estate, and Gift Tax Technical Resource Panel in Washington DC, on Oct. 29, 2002, about the latest developments, including possible initiatives. Since April 1999, the IRS has been treating FLP cases as an Appeals coordinated issue, to reduce inconsistencies in settlement offers across the nation.

The Scoop

Valuation discounts. Across the nation, there are 42 estate and gift tax Appeals OfFicers. Currently, they have to discuss the facts of each case (both pre- and post-conference) with Ms. Edelstein, before making a settlement offer. Ms. Edelstein then recommends the amount of discount allowable. Appeals maintains a log of FLP cases around the nation, which includes statistics on discounts, settlement offers and final outcomes.

Appeals classifies FLPs holding assets such as cash, marketable securities, closely held stock and real estate (triple-net lease) as passive-asset FLPs. Passive-asset FLPs holding cash and/or marketable securities currently are settling at approximately a 25% discount. Those holding closely held stock and/or real estate are reaching settlements with discounts in the 25%-40% range. FLPs formed within six months of death are subject to...