IRS Gives UP—Huge Tax Break Available

Interest in family partnerships has surged. This is a powerful device for reducing or even eliminating estate taxes. Here’s the idea.

You and your children form a family partnership. You are the general partner and you control the partnership. You transfer a $1 million apartment building to the partnership (such transfers are not taxable). You gift the limited partnership interests (usually over time) to your children. Now, some of the partnership (and the apartment building) is owned by you and some by your children. IRS agrees that these partial interests qualify for a “minority interest” discount. The idea is that 30% ownership of a building is worth less than 30% of the whole building because no buyer wants a 30% interest in a building.

• Depending on the facts, it’s common that IRS agrees to a 30% discount. Simply by having an attorney draw up a partnership between you and your children,
• Changing the deed on the building to show it is held by the partnership,
• Gifting some of the partnership interests to your children

You will have reduced the estate tax value of the building from $1 million to $700,000 (a 30% discount). Estate tax saved in the 50% bracket = $150,000.

IRS tried to fight this for years but they gave up and agreed to the above (Revenue Ruling 93-12).

If your estate is over $2.5 million consider a family partnership or other powerful tax saving devices. We would be happy to explain which plan works best in your situation. Check the coupon or call the office.