On Discounted Partnership Interests and Adequate Consideration‪.‬

I. INTRODUCTION Family limited partnerships (1) have dominated the judicial landscape in the estate and gift tax arena for nearly a decade. (2) From the perspective of taxpayers, these entities offer virtually irresistible appeal as trust substitutes for estate-planning purposes. Their principal advantage lies in the prospect of significant estate and gift tax savings generated through the exploitation of discounts used to value equity interests in closely held entities. However, the benefits of family limited partnerships are not limited to tax savings. Transferring property to a closely held entity provides a state-law basis for claiming that the property is exempt from the claims of the owners' creditors. At the same time, the consolidation of property into a single entity offers certain asset management advantages (e.g., reduced administrative expenses or access to preferred investment opportunities).