California Real Estate Investors Use Family Limited Partnerships

The IRS issued new guidelines for family limited partnerships (FLPs) applicable to many of my clients in Los Angeles County, Ventura County, Santa Barbara County and Orange County.

Those FLP guidelines focus on 4 issue of concern to California real estate investors and those considering using the FLP as an estate planning tool. Those issues are:

Whether the fair market value of transfers of family limited partnership or corporation interests, by death or gift, is properly discounted from the pro rata value of the underlying assets.

Whether the fair market value at date of death of I.R.C. §§ 2036 or 2038 transfers should be included in the gross estate.

Whether there is an indirect gift of the underlying assets, rather than the family limited partnership interests, where the transfers of assets to the family limited partnership (funding) occurred either before, at the same time, or after the gifts of the limited partnership interests were made to family members.

Whether an accuracy-related penalty under I.R.C. § 6662 is applicable to any portion of the deficiency.

The Appeals Settlement Guidelines can be read in more detail at the IRS website.

These issues should be familiar to your tax advisor. Schedule a discussion about these new guidelines as soon as possible – get tax help which benefits you. If you would like to discuss this or other estate planning matters with Mitchell A. Port, call him at 310.559.5259.