Family partnerships have been become increasingly popular as a means of avoiding estate and gift taxes. As other estate freezing techniques have been closed off by statutory anti-abuse rules, estate planners have increasingly resorted to partnerships as a vehicle for transferring assets within a family at deeply discounted values. Discounts ranging from one-third to over one-half of the value of the underlying assets are routinely claimed, and often allowed, based on lack of marketability and lack of control, even where these disabilities have no lasting or ascertainable economic effect. Nevertheless, the use of family partnerships to suppress value for transfer tax purposes rests on shaky conceptual premises which deserve closer scrutiny.
Karen C. Burke & Grayson M.P. McCouch, Family Limited Partnerships: Discounts, Options, and Disappearing Value, 6 Fla. Tax Rev. 649 (2004), available at http://scholarship.law.ufl.edu/facultypub/513