In Kimbell v. U.S.A., Case No. 03-10529 (May 20, 2004), Ruth Kimbell transferred most of her estate to three entities, one of which was a family limited partnership. The Service disputed several transfers to the estate, claiming they were not a bona fide sale at “arm’s length” for full and adequate consideration. Furthermore, the Service argued to disallow the partnership interest valuation discount. The court held that in this case there was a bona fide sale, insofar as Kimbell relinquished her control of the assets formerly directly controlled by her in exchange for a proportionate partnership interest with the capital account of Kimbell credited with a fair market value for such assets. Furthermore, as dicta the court rejected the Service’s contention against the discounted partnership valuation, insofar as such partnership interest was transfer-restricted and non-participatory and the court recognized that preservation and continuity of the family business is a valid business purpose. The Kimbell case provides important guidance on the great care that must be taken to properly plan and administer the family business and its assets.


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