Tax Law and Business Organization Strategy

Taxpayer Victory in "Family" LLC Case

In a new Tax Court case (March 26, 2008), the taxpayers successfully withstood the IRS' challenge of a family entity formed shortly before the death of the family matriarch. Estate of Anna Mirowski, et al. v. Commissioner, (2008) TC-Memo 2008-74. It seemed that the IRS was on its way to "running the table" on family limited partnerships and family limited liability companies. So, it is encouraging to see that the Tax Court is not going to apply Code Section 2036 to ignore all family owned entities in which a decedent had an interest.

I have not yet fully digested the case and all of its implications. However, it is clear that the issues are factual when a court decides whether to apply Code Section 2036 to a family owned entity. Exactly what facts are fatal is still not clear. But this case did have some facts that are common to other IRS victories. So, the "lists" of things to do and not do will have to be adjusted after this case.

More will follow on this subject after I have had more time to examine the case and its facts.

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