Ed Zollars, CPA wrote:
- quote -

Is that your case? Must be interesting.

- quote -

Right.

- quote -

Yup. They still weren't saying that the 2036 argument would
win, but just that the court should have considered it.

- quote -

Thanks. I didn't see that one.

- quote -

Good luck.

Stu

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Stuart Bronstein wrote:
- quote -

Well, actually we're on round 4, with one taxpayer win and
two taxpayer losses.

Strangi Round I (generally referred to as Strangi I) - Tax
Court published decision, taxpayer wins *however* the Tax
Court dodged making a decision on 2036 by claiming the IRS
raised the issue too late in the process. The court
strongly hints that *if* it had considered 2036, the
decision would have been different.

Strangi Round II (appeal to the 5th Circuit, formally known
as Gulig, Rosalie, Independent Exrx. v. Com., 89 AFTR 2d
2002-2977, 293 F3d 279) - affirmed Tax Court on issues they
decided *BUT* determined the Tax Court should have allowed
the 2036 argument.

Strangi Round III (generally referred to as Strangi II) -
Tax Court, in a memorandum decision, finds against the
taxpayer on the 2036 issue.

Strangi Round IV - arguments have been heard in the Fifth
Circuit on the appeal of Strangi II by the taxpayer.
Decision to come <grin> .

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"Ed Zollars, CPA" <ezollar[at]mindspring.com> wrote:

- quote -

With the recent 5th circuit victory in Kimbell, I think that
Strangi is much less of a problem. Not that there is no
reason to worry, but the primary reason Strangi is a problem
for the taxpayer is its particular facts. The taxpayer used
the partnership's property without paying rent and didn't
keep enough money outside the partnership to pay living
expenses. The effect was that it was as if he never gave up
the property.

That said, we're all watching Strangi, but Kimbell goes a
long way toward providing a precedent for upholding
partnership transfers in the 5th circuit, at least in cases
where the taxpayer does not appear to have been greedy.

We have recently gotten very good settlements from IRS on
administrative appeal of FLP cases based upon the decision
in Kimbell.

Brian Bivona

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Ed Zollars, CPA wrote:
- quote -

I just read it, and that's not the one. There the taxpayer
won, though the issue was not quite the same.

- quote -

That had been an issue that bothered me for years. I'm glad
to see it's finally been addressed.

The reason they said that was that the operating agreement
of the LLC restricted sale of the shares. The court
indicated that if there had been no such restriction, that
the owner of the shares had the right to sell without
consent, it would have been considered a present interest.

Stu

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David Woods, EA, ChFC, CLU wrote:

- quote -

Actually, Hackl is the case you are thinking of, where the
court held that a gift of an LLC interest in that case was
*NOT* a gift of a present interest and not eligible for the
annual exclusion. It was somewhat important, since as I
recall there were a *LOT* of recipients <grin> .

The Strangi case is the big problem case for FLPs, at least
if Judge Cohen's 2036(a)(2) analysis and application of the
Byrum case to that section is upheld. It's important to
note that the *result* could still be upheld on appeal
without the Fifth Circuit having to accept the 2036(a)(2)
analysis.

I don't believe the Fifth Circuit will uphold that analysis
on appeal, but if they did it would make creating a FLP that
could withstand challenge *VERY* difficult (in fact,
virtually impossible). It's the major reason why Strangi is
being followed so closely.

--
Ed Zollars, CPA
Phoenix, Arizona

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David Woods, EA, ChFC, CLU wrote:

- quote -

Strangi (or more accurately, Estate of Strangi) is the
taxpayer's name, I believe.

Phoebe

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"Stuart
Bronstein" <spamtrap[at]lexregia.com> wrote:

- quote -

Well there was a case in '03 I believe in which the courts ruled that that
was NOT the case. The members of the LLC were not allowed sufficient
control over their interests and as a result it was ruled a future interest
gift and the gift exemptions disallowed. I want to say it was the Stranglis
<sp> case but I am not certain without looking it up.

--
David M. Woods, EA, ChFC, CLU
Woods Financial Services
Norwood, MA 02062
www.woods-financial.com

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Raymond wrote:

- quote -

The problem with a trust is that either the beneficiary has
a current interest (in which case the trustee may not have
total control), or it is a future interest, in which case no
annual gift tax exclusion is available.

- quote -

With an LC or an LLC the parent can retain effective control
while making gifts of proportionate interests in property.
The last time I checked an interest in one of these entities
is considered a present interest, even if the beneficiary
has no control over the property owned by the entity.

Stu

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A person has a number of non-business properties (vacant
lots, vacation homes etc.) which he wants to partially gift
to his children on a yearly basis.

Can you gift percentages of a trust on a yearly basis ? Is a
discount possible ?

Are there any rulings that favor LLC's or FLIPs for non
business purposes ?

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