Tax Court Holds Estate Includes Assets Transferred to Family Limited Partnership; Equitable Recoupment Applies

The Tax Court, in Estate of Erma V. Jorgensen et al. v. Commissioner, TC Memo 2009-66 (March 26, 2009), held that an individual's estate included assets the individual transferred to family limited partnerships. The holding was based on the grounds that no bona fide sale had taken place and that the individual retained control over the assets. In addition, however, the court held that the estate is entitled to equitable recoupment for the income taxes the individual's children and grandchildren overpaid on the sale of those assets. 

Posted by Min Young Choi, Associate Editor, Wealth Strategies Journal.