In the latest Tax Court family limited partnership (FLP) case, Estate of Webster E. Kelley et al. v. Commissioner (T.C. Memo. 2005-235; No. 16894-03), the Tax Court determined the fair market value of a decedent's interest in the FLP based solely on section 2031, with IRS conceding on section 2036, which had been the Code section applied in most of the other recent FLP cases this year. The Tax Court allowed a combined 35 percent discount (12 percent minority discount and a 23 percent marketability discount) in valuing the decedent's 94.83 percent limited partnership interest in an FLP owning only cash and certificates of deposit. The Court also allowed the same 35 percent combined discount for the decedent's one third interest in the LLC that owned the 1 percent general partnership interest. It is interesting that before going to Court, IRS had agreed to a 25.2 percent combined discount for lack of control and marketability on a partnership that held nothing but cash and certificates of deposit (while the taxpayers had claimed a 53.5 percent combined discount for lack of control and marketability).

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