Like bringing a knife to a gunfight: Why IRC Section 2036 is not the right weapon to combat abusive family limited partnerships.

Family Limited Partnerships ("FLPs"), which were once a great estate planning technique, have now become victim to Section 2036 assertions made by the IRS. Over the years, the IRS has struggled to find a means to combat abusive FLPs until the courts began to embrace Section 2036 as a weapon for them to use. Different courts, however, have maintained different rules and have now subjected both abusive and non‐abusive FLPs to inclusion of their assets into their gross estates. This has shed light onto the main issue, that is, that Section 2036 is not the appropriate tool to combat abusive FLPs. Key Points for the Family Court Community: FLPs have been a popular way for families to pool their assets in order to effectively manage and transfer the assets from one generation to the next.Families can use FLPs to reduce estate and gift taxes by 20% or more if the entity is respected.Different courts have interpreted other courts' decisions differently, leading to the expansion of Section 2036 at the expense of the taxpayer.Case law has created problematic law which has affected non‐abusive FLP's malevolently.FLPs can be used to obtain tax benefits, but must be used for non‐tax purposes as well. Some include centralization of management, facilitating intra‐family transfers, and avoiding probate. [ABSTRACT FROM AUTHOR]