Family Limited Partnerships have become a valuable estate planning tool. The IRS has attacked Family Limited Partnerships using a number of different approaches. Recently, the IRS has had some success with an attack based on Internal Revenue Code Section 2036.

One way to avoid that attack is to qualify for an exception to Section 2036 that applies to bona fide sales for full and adequate consideration. On March 15, 2005, the Tax Court issued its ruling in Estate of Bongard v. Comm’r which indicates its opinion as to when that exception applies.

This Client Advisory sets forth our summary of that case.