Estate of Strangi, Section 2036, and the Continuing Relevance of Byrum

Abstract:     
This report analyzes the potential application of section 2036(a) to limited partnerships employed for estate planning purposes, using the facts of Tax Court case of Estate of Strangi v. Commissioner as a guide. Particular emphasis is placed on the Commissioner's argument for inclusion under section 2036(a)(2) based on the taxpayer's control over the property transferred to the partnership, as well as the taxpayer's argument under the Supreme Court case of United States v. Byrum that the existence of the taxpayer's fiduciary duty to the partnership negates the application of section 2036 altogether. The report concludes that, because the essential facts of United States v. Byrum are lacking in the estate planning partnership context, the Byrum decision should not shield taxpayers using limited partnerships as a trust substitute from the application of section 2036(a)(2).

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