IRS Wins Key Ruling On Popular Planning Tool That Can Trim Tax Bite

The Internal Revenue Service won an important victory in its attempt to stop the misuse of family limited partnerships, a widespread estate-planning technique used by the wealthy to transfer large chunks of property to heirs while trimming estate and gift taxes.

This month, an appellate court affirmed an earlier decision that ruled nearly $3 million given to two family limited partnerships must be included in the donor's estate. Kirkland partner David Handler said that the ruling will give him "greater pause, greater caution," in recommending family limited partnerships to clients.

This article appeared in its entirety in the September 22, 2004 edition of The Wall Street Journal.