In the 1990s, rulings by the IRS and the courts confirmed the availability of valuation discounts for those transfers, a development that greatly expanded the popularity of FLPs. Assets worth, say, $1 million could be given away but those assets might be valued at only $600,000 or $700,000 if held within an FLP and subject to liquidity constraints.
The 2001 tax law gives you more leverage to work with. Previously, the gift tax exemption amount was $675,000, and now it’s $1 million, so there is more room to transfer assets through an FLP. You might be able to transfer $1.5 million worth of assets and take a 33.3 percent discount, to stay within the $1 million exemption amount. A married couple might be able to transfer $3 million now, vs. around $2 million last year.
