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Joanne M. Wandry and Albert D. Wandry vs. Commissioner of IRS, T.C. Memo 2012-88, Filed March 26, 2012.

The Facts:

Albert and Joanne Wandry formed the Wandry Family Limited Partnership (“Wandry LP”) in 1998, contributing cash and marketable securities to the partnership.  The Wandry’s spoke to their tax attorney regarding the gift tax consequences of making transfers of limited partnership interests to their children and grandchildren.  The Wandry’s were advised they could transfer interests by using their annual gift tax exclusions of $11,000  per donee and additional gifts in excess of their annual exclusion of up to $1 million for each Mr. and Mrs. Wandry.

In January of 2000, the Wandry’s began gifting Wandry LP partnership interests to their children and grandchildren.  The Wandry’s tax attorney advised that the exact value of the partnership interests transferred would not be known until a later date, after the gifts had been made and a valuation of the assets had been performed.  The Wandry’s were advised to transfer a specific dollar amount instead of partnership interests and that gifts should be transferred as of either December 31 or January 1 of the year so that a midyear closing of the books would not be required.

In April of 2001, the Wandry’s started a new family business and on August 7, 2001, the Wandry’s formed Norsemen Capital, LLC (“Norseman”).  By 2002, all of the Wandry LP assets were transferred into Norseman. [...]

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