Davis: Family partnerships
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The family partnership is an often overlooked planning technique with some important advantages, and it is a technique frequently used as a means of shifting income from parents to children or other family members. It may also be used to “freeze” the value of an individual’s estate by shifting future growth in various assets to other family members. In addition, it is also often used to fractionalize an individual’s interest in business assets or real estate to create valuation discounts. Family partnerships are most commonly used to hold family business interests or real estate. There are several requirements for a family partnership: 1. Capital must be a material income-producing factor. Personal service businesses generally do not qualify since the business must require substantial inventories or substantial investment in plant, machinery or other equipment. 2. If the family partnership was created by gift, the donor should be paid a reasonable salary for services rendered to the partnership before profits are allocated among the partners. 3. The income of the partnership must be allocated in proportion to each partner’s capital investment. More : dodgeglobe.com |