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6 J. Pract. Est. Plan. 21 (2004-2005)
Family Limited Partnerships: The Pendulum Swings or Have FLPs Flipped?

handle is hein.journals/jrlpep6 and id is 305 raw text is: Estate Planning/December 2004-January 2005 Family Limited Partnerships: The Pendulum Swings or Have FLPs Flipped? James Dossett and Stacy Thomas provide a survey of recent family limited partnership cases and ask whether these partnerships are still extremely valuable estate and business planning tools and how the risk involved in the use of these vehicles can be minimized. Introduction Since 1997, the IRS and taxpayers have waged war over the estate and gift tax consequences of fam- ily limited partnerships (FLPs). Significant nontax and tax ad- vantages make the family limited partnership a popular entity for es- tate planning. Initially, the IRS was largely unsuccessful in attacking these entities and the associated tax benefits. Around the middle of 2002, however, the IRS began having notable success in litigated cases.' Now, as 2004 draws to a close, these government victories are being reviewed by appellate courts with mixed results. Thus, the all important question for estate planners: Has the pendu- lum swung so far that the family limited partnership is not a viable entity for estate planning? This article will discuss the reasons for the popularity of limited partner- ships, the IRS attacks on them, and current issues and lessons learned for forming and operating family limited partnerships. Background A limited partnership is a type of partnership arrangement cre- ated under state law. It has two classes of partners, general and limited. General partners control and operate the partnership and have personal liability for any claims against the partnership. Limited partners have very lim- ited participation in management or control of the partnership and have no personal liability for claims against the partnership. The general partners typically own a very small percentage (perhaps one percent) interest in the limited By James K. Dossett, Jr. and Stacy E. Thomas 02004 JK. Dossett, Jr. and S.E. Thomas James K. Dossett, Jr., is a Shareholder and Managing Partner in the Jackson, Mississippi office of Baker, Donelson, Bearman, Caldwell & Berkowitz, a Professional Corporation. Stacy E. Thomas is a Shareholder in the Jackson, Mississippi office of Baker, Donelson, Bearman, Caldwell & Berkowitz, a Professional Corporation. Um

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