Estate of Beatrice Kelly v. Commissioner (U.S. Tax Court)

Prior to death, Beatrice Kelly, decedent, transferred assets to four limited partnerships and retained over $1.1 million in her own name. The Commission claimed that Ms. Kelly retained an interest in the assets and that these transfers were not bona fide sales and should be included in the gross estate. The court determined that the transfer of assets was in fact a bona fide transfer as the decedent observed partnership formalities and retained sufficient assets for personal needs. The general partner of all the four limited partnerships, KWC Management, Inc., which the decedent has sole ownership was paid management fees for managing the assets in the FLPs. Despite the fact that there was not enough documentation to show that the descendent performed true management duties, it can be agreed that the relationship between the assets and Ms. Kelly changed significantly upon the formation and transfer of the assets to the FLPs. As such, only KWC should be included in the estate and no the transferred assets.