REVENUE Ruling 93-12 was issued by the Internal Revenue Service in 1993. This ruling allowed a taxpayer to transfer minority blocks of stock in a closely held corporation to family members and take a minority interest discount in valuing the transfer for gift tax purposes. As a result of this landmark ruling, an abundance of limited partnerships have been formed among family members, used to hold property typically owned by older generations. These partnerships are commonly known as Family Limited Partnerships (FLP’s), and while it is common for these entities to also be structured as Family Limited Liability Companies (FLLC’s), for purposes of this article, references to FLP’s are intended to apply to both entity structures.
In recent years, FLP’s have played an integral role in divorce litigation among high net worth couples. In some cases, FLP’s have become manipulative devices used to maneuver funds and assets away from an equitable distribution to the parting, former spouse.
