Monday, April 29, 2013

( Gunmakers and the NRA ) Patcnews April 29, 2013 The Patriot Conservative News Tea Party Network Reorts Gunmakers and the NRA © All copyrights reserved By Patcnews


U.S. files new suit on Ariz. immigration issue




By Jerry Markon
Tuesday, August 31, 2010
The Justice Department filed another lawsuit against immigration practices by Arizona authorities, saying Monday that a network of community colleges acted illegally in requiring noncitizens to provide their green cards before they could be hired for jobs.
The suit against the Phoenix area Maricopa Community Colleges was filed less than two months after the Justice Department sued Arizona and Gov. Jan Brewer (R) over the state's new immigration law. It also comes as the department is investigating Joe Arpaio, the sheriff in Maricopa County, who is known for tough immigration enforcement.
In Monday's lawsuit, Justice officials said the colleges discriminated against nearly 250 noncitizen job applicants by mandating that they fill out more documents than required by law to prove their eligibility to work. That violated the federal Immigration and Nationality Act, the department said.
The law's anti-discrimination provision "makes it unlawful to treat authorized workers differently during the hiring process based on their citizenship status," said Thomas E. Perez, assistant attorney general for Justice's Civil Rights Division. He said the government "is acting now to remedy this pattern or practice of discrimination."

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Tom Gariepy, a spokesman for Maricopa Community Colleges - which operates 10 colleges and two vocational training centers in and around Phoenix - declined to comment.
Justice Department officials said the lawsuit is unrelated to the case against Brewer and the probe of Arpaio and stems from a different investigation that began in January 2009 - the month the Obama administration took office.
It is the latest example of stepped-up enforcement by the department's Civil Rights Division, which has been reshaping itself after an exodus of lawyers during the Bush administration. It filed a similiar lawsuit in April against John Jay College of Criminal Justice in New York.
The lawsuit was filed Tuesday before the Executive Office for Immigration Review, a Justice Department unit that adjudicates immigration cases. It was filed on behalf of Zainul Singaporewalla, a U.S. permanent resident who was offered a math teaching position at Glendale Community College, part of the Maricopa network.
After filling out a federal form attesting to his immigration status and producing a driver's license and Social Security card, he was told to complete another form with more immigration-related information, the lawsuit said.
That form required other documents and his green card. When he couldn't present his green card, the suit said, the college would not process his paperwork and would not let him work.
The government is asking a judge within the Justice Department unit to order the Maricopa colleges to pay a civil penalty of $1,100 for each of the 247 non-U.S.-citizen job applicants it says were required to produce the additional documents. It says the colleges ended the practice in January.

 


BREAKING: New Law – Guns Bought in Arizona Buybacks CANNOT Be Destroyed, Will be Sold to Public

April 30 2013
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Photo: Wikimedia Commons (Public Domain)
Photo: Wikimedia Commons (Public Domain)
Arizona Governor Jan Brewer signed into law yesterday a bill that would make the destruction of guns bought through government organizaed buybacks illegal.
The wording of the new law requires that whenever a government sponsored gun buyback takes place the guns acquired must be publicly auctioned off, just like every other piece of non-evidence property.
Proponents of the NRA backed law say that the buybacks were costing taxpayers a large sum of money by using government funds to purchase and destroy weapons.
According to the AZDailySun.com, the law is not meant to completely remove the ability to destroy a gun in the state, but only to limit the use of government resources to do so.

Proponents of the legislation said none of this keeps the owner of a firearm from having it destroyed. The only difference, they said, is that this would have to be done privately, without involvement of municipal employees.
Any guns bought will be sold at public auction, but only federally licensed firearms dealers will be permitted to purchase the firearms. Those dealers can then sell the firearms to the general public following the same laws and regulations for normal gun sales.
Obviously, anti gun Democrats were not happy about the measure.

“This action by the governor is not only outrageous, but it is insensitive for us now to be putting these guns back on the streets,” said state Senator Steve Gallardo, a Democrat and a leading opponent of the measure. “That’s just plain wrong.”
The bill was passed by the state House back in March, the Senate earlier this month, and was signed by Brewer yesterday.

Gunmakers aim for greener pastures as states pass new firearms laws



CT gun industry.jpg

Arms manufacturers in at least two states with strict new gun laws are making good on their promise to move their operations -- along with thousands of jobs and millions in tax revenues  -- to locales they deem friendlier to the industry.
In Connecticut, where venerable gunmakers like Colt and Sturm, Ruger & Co. have been joined in the last decade or so by upstarts like Stag Arms and PTR, reform of gun laws in the wake of the Sandy Hook school shootings has left the industry feeling unwelcome. Bristol-based high-end rifle manufacturer PTR Industries announced this month via Facebook that it would be taking its 40 jobs and $50,000 weekly payroll to an unspecified new state, widely believed to be Texas.

“With a heavy heart but a clear mind, we have been forced to decide that our business can no longer survive in Connecticut – the former Constitution state.”
- Gunmaker PTR INdustries, in Facebook statement
“With a heavy heart but a clear mind, we have been forced to decide that our business can no longer survive in Connecticut – the former Constitution State,” PTR said in a statement earlier this month.
AR-15 manufacturer Stag Arms could soon follow suit, along with Colt's Manufacturing and Mossberg & Sons. The moves could cost the Nutmeg State 3,000 jobs as well as the estimated $1.75 billion in annual taxable revenues.
Texas is making no secret of its desire to lure the gunmakers. This month, Gov. Rick Perry turned to Twitter to welcome PTR to move to the Lone Star state.
“Hey, PTR," Perry posted on Twitter. "Texas is still wide open for business!! Come on down!"
This month, Connecticut lawmakers approved a wide-ranging bill that includes new restriction on weapons and large capacity ammunition magazines. The 139-page bipartisan bill passed 26-10 in the Senate and 105-44 in the House. The new law adds more than 100 firearms to the state’s assault weapons ban and creates what officials have called the nation’s first dangerous weapon offender registry as well as eligibility rules for buying ammunition.
The push to reform gun control laws accelerated after the Dec. 14 massacre of 20 children and six adults at an elementary school in Newtown, Conn. Although proposals for strict new federal laws have not gained traction, states have taken it upon themselves to crack down on arms. Connecticut joins California, New York and Massachusetts in having some of the country’s strongest gun-control laws on the books.
Like Connecticut, the fight over tighter restrictions prompted several gun manufacturers in Colorado to threaten to leave.
In March, Colorado Gov. John Hickenlooper signed bills that would require background checks for private and online gun sales and ban ammunition magazines that hold more than 15 rounds
Magpul Industries, which manufactures firearms accessories and ammunition magazines, said on its Facebook page that it would have "no choice" but to leave if the magazine bill was signed, causing an opening for states eager to prove they're more gun-friendly.
Magpul employs more than 200 people and generates about $85 million in annual taxable revenues.
Grassroots Facebook pages have popped up -- some, before the Colorado bills were even signed -- encouraging Magpul to settle in places like Alabama, West Virginia or Alaska.
Alaska state Rep. Tammie Wilson's staff created a Facebook page, too, called "Magpul Industries -- Alaska Wants You."
But no one has worked harder than Texas to make gun companies feel welcome. Lawmakers there have green-lighted a measure that would free up money to local and regional economic development agencies to offer incentives to gun manufacturers to relocate in the state. Perry says it's all about bringing jobs to his state, "whether you’re a weapons manufacturer or whether you’re a tubular steel manufacturer.”
"There is still a place for freedom that is very much alive and well," Perry said. "That place is called Texas."
The Associated Press contributed to this report.



Read more: http://www.foxnews.com/politics/2013/04/29/gun-manufacturers-start-leaving-states-that-passed-new-gun-control-laws/#ixzz2Rt2fXCa2




Let your golden years be the most precious of your life, full of freedom and choice. A time to pursue your hobbies, travel and enjoy the good life. You will never miss your salary cheque or be constrained by rising inflation. Even as you work hard to make a better today, it is up to you to create a superior tomorrow. If you want to sustain your current lifestyle even after you stop working, make that money work for you.
A Pension Plan is a plan for setting aside money to be spent after retirement.
Pension Plans which will make sure that we are there to support you in every stage of your life and your savings today become your wealth and support for your future years to come.

Key Features
• A Guaranteed Monthly from the Selected Retirement Age and continued during the lifetime of the policyholder
• A Guaranteed Life Assurance amount from inception until age 75 or 90
• There is no upper limit to the amount of premium that can be paid into the Personal Pension Plan • 100% of your contribution will be credited to Personal Pension Fund Account (PPFA).



 LINKS
EFFICACY OF FAMILY LIMITED PARTNERSHIPS: A CASE STUDY

The Family Limited Partnership (FLP) is probably the most beneficial structure available for wealth preservation via asset protection, estate planning and tax minimization. Although you "can't take it with you," by placing your assets into FLPs you can legally and successfully protect everything you own from attack by creditors and from erosion by exorbitant taxes.
In order to illustrate the efficacy of Family Limited Partnerships from an asset protection, estate planning and tax minimization point of view, consider the case of "Dr. Jones," a fictitious character derived from actual client situations. [Although, for illustration purposes, we have created a hypothetical physician, the principles discussed herein apply equally to all professionals and, indeed, to all individuals who have accumulated significant wealth.]
Dr. Jones is a successful physician in Long Island, New York. He is approximately 50 years old, is married with three teen-aged children, and is chief of surgery at a major hospital. Dr. Jones' estate is worth approximately five million dollars.
In addition to his surgery practice, Dr. Jones owns his home, as well as several investment properties including an apartment building and a shopping center. Dr. Jones also sits on the board of directors of his hospital and his country club.
Dr. Jones wanted to establish a wealth preservation strategy for three specific reasons:
  1. Dr. Jones was very concerned by the proliferation of medical malpractice lawsuits and wanted to protect his significant assets in the event that he was sued by a patient. In addition, Dr. Jones knew that as a landlord, he was prone to litigation from tenants and other persons who might be injured on one of his properties. He was sensitive to the fact that as a physician and a property owner, he was perceived as a "deep pocket target" by aggressive negligence lawyers.
  2. Dr. Jones wanted to reduce his estate tax liability so that upon his and his wife's deaths, their children would inherit as much as legally possible, with as little as possible (or nothing) paid to the I.R.S. in the form of inheritance taxes.
  3. Dr. Jones hoped to minimize his current income tax liability on the income received from his rental properties.

FIRST GOAL: ASSET PROTECTION

Asset protection is defined as the safeguarding of personal wealth from attack by future creditors. "Assets" are broadly defined and include homes, cars, boats, jewelry, business interests, cash, bank accounts, brokerage accounts, stocks, bonds, art and other collections, real estate, etc.
"Creditors" are also broadly defined and include actual creditors as well as identifiable probable creditors, such as litigants, soon-to-be ex-spouses, disgruntled business partners, or anyone who you know that has a claim against you, even if they do not yet know it. Creditors may even include government agencies, such as the I.R.S.
The effectiveness of an FLP in providing asset protection is statutory, meaning that it has been codified as law. The Revised Uniform Limited Partnership Act (RULPA), which has been adopted in all fifty states, provides that the assets owned by a limited partnership are not owned by the individual partners.
Therefore, those assets cannot be attached by the personal creditors of a partner. If a person contributes assets to an FLP, those assets are no longer owned by that person (although, as explained below, the person may still control those assets), and creditors of that person may not attach those assets merely because they have a judgment against a partner of the FLP.

The Essence of Asset Protection Planning: Control Everything But Own Nothing

A family limited partnership is, by definition, a joint venture between family members. The partnership is comprised of both general and limited partners. Dr. and Mrs. Jones are each the general partners. [Because Mrs. Jones is not a licensed physician, Dr. Jones is the sole general partner of the FLP that owns the stock in his medical practice.]
Dr. and Mrs. Jones also own limited partnership interests, as do their children. The general partners manage and control the partnership. The general partners decide and implement all decisions of the partnership, such as whether to buy or sell an asset in the partnership, what investments the partnership should make, and whether to make a distribution of profits from the partnership. The general partners may even determine to dissolve the FLP. It should be apparent that the general partners control the operation of the partnership, in their absolute discretion. Dr. and Mrs. Jones thus control the assets and make the decisions regarding those assets just as they did before the FLP. Although they transferred legal ownership or "title" to those assets to the FLP, they retained control.
Unlike corporations, FLP's are not democracies -- there is no 51% majority control. Even if they own 99% of the FLP, the limited partners do not outvote the general partners. The limited partners in the FLP are similar to "silent" partners or passive investors.
They have equity interests in the partnership, but have no decision making authority over the partnership or the assets therein. Limited partners, for example, are not entitled to demand distributions or other payments from the FLP. In addition, limited partners may not sell or assign their partnership interests without the consent of the general partners, nor force the liquidation of the FLP. The general partners are thus in complete control of the FLP, although they do not own the assets in the FLP.

The Structure of the Asset Protection Plan: Segregation of High Risk Assets

Dr. Jones and his advisors set up a complete FLP plan in order to achieve his first goal, asset protection. Early in the process, they took inventory of Dr. Jones' assets. They examined each asset individually and evaluated its likelihood of being attacked, based on the chances it would generate a liability. They placed each of Dr. Jones' properties into a separate FLP.
Thus, the shopping center that he owned was placed in one FLP, and his apartment building was placed in another FLP. The reason for treating each real estate asset individually and placing each one in its own FLP is to minimize the litigation exposure of each asset.
If an FLP would be sued as owner of a property by someone hurt on that property, assets in a different FLP would not be in danger. In general, high risk assets or those prone to litigation, such as rental property, should be kept separate from low risk assets, like Dr. Jones' personal bank and brokerage accounts, which were all placed into one FLP. Dr. Jones' home was also placed into a separate FLP. Dr. Jones' private medical practice was registered as a professional corporation.
Dr. Jones owned one hundred percent of the stock of that corporation and he placed that stock into a separate FLP. If Dr. Jones were to get sued, the professional corporation would cease paying him a salary. Instead, it would distribute profits (and management fees) directly to its shareholder, the FLP, where the money would be protected.
Thus, Dr. Jones' assets were protected from each other and, as explained below, they were all protected from any future personal attack against him.

Keeping The Wolves Out: A Few Examples

During one snowy winter day, a tenant in Dr. Jones' apartment building stepped outside, took a few steps and promptly slipped on the icy sidewalk. An aggressive personal injury attorney convinced the tenant to sue her landlord for injuries sustained in the fall, including pain and suffering, loss of income and post-traumatic stress. The tenant's spouse also sued for "loss of consortium".
The attorney, expecting to reap a windfall from a "deep pocket" doctor, took the case on a 33% contingency. When the attorney investigated who the landlord was, to his chagrin he learned that it was the "Dr. Jones Apartments Family Limited Partnership," not Dr. Jones himself.
A little more research revealed that the partnership owned no assets other than the apartment building, and a local bank held a large mortgage on the building. All of Dr. Jones' other assets were owned by other FLPs which had nothing to do with this accident and could therefore not be included in this lawsuit.
To their great disappointment, the tenants and their attorney quickly understood that there was no "deep pocket" and there would be no windfall. The attorney realized that, even if he won the case, the judgment would be uncollectible. Since 33% of zero equals zero, he quickly settled for whatever Dr. Jones' insurance company offered and went away.
The very next month, an auto accident occurred in the parking lot of Dr. Jones' shopping center. A smarter, more aggressive negligence lawyer, realizing that a lawsuit against the "Dr. Jones Shopping Center Family Limited Partnership" would not yield very much, also sued Dr. and Mrs. Jones personally as general partners of the FLP.
He claimed that, as general partners, they were personally liable for the FLP's negligence in maintaining the shopping center. Dr. and Mrs. Jones' attorney promptly informed the plaintiff's negligence lawyer that Dr. and Mrs. Jones had no attachable assets.
They owned nothing -- not even Dr. Jones' medical practice (although they controlled a great deal). A judgment against Dr. and Mrs. Jones would therefore be uncollectable. Once again, there was no "deep pocket" and no windfall. Rather than wasting his time on a case with little or no potential reward, this lawyer also quickly settled for Dr. Jones' insurance company's offer.
The following summer, when a guest was hurt in the swimming pool at Dr. Jones' country club, the injured guest sued not only the country club, but also each of the members of the club's board of directors, including of course, Dr. Jones. The plaintiff claimed negligent supervision of the club by its directors. Unfortunately, the country club did not carry errors and omissions insurance for its directors.
Again, Dr. Jones' attorney promptly explained to the plaintiff's attorney that Dr. Jones had no attachable assets. In order to avoid a lengthy litigation and its attendant legal expenses, Dr. Jones offered to settle the lawsuit against him for a nominal amount -- less than the expected cost of legal fees to defend it.
Dr. Jones made his settlement offer to the plaintiff on a "take it or leave it" basis. Since the settlement offer was better than an uncollectible judgment, the plaintiff reluctantly took it. The plaintiff pursued his litigation against the country club and the other unprotected directors, while Dr. Jones watched from the golf course.
Finally, one of Dr. Jones' patients developed a post-surgical infection with complications. The patient sued Dr. Jones, the hospital and every doctor and nurse who had any contact with the patient during and after the surgery. The lawsuit demanded $5,000,000 in damages from each defendant, jointly and severally. Unfortunately, last year Dr. Jones' malpractice insurance company had reduced the liability limits of all policies across the board to $1,000,000 maximum per occurrence.
If the plaintiff were to win his lawsuit, Dr. Jones would be personally liable for $4,000,000. Once again, Dr. Jones' attorney uttered the magic words, no attachable assets. The plaintiff accepted the insurance company's payment of $1,000,000 in full settlement of his claim against Dr. Jones and dropped the doctor from the lawsuit.
In each of the above cases, the fact that Dr. Jones had no attachable assets served to effectively discourage the lawsuit. Once the plaintiff realized that, even if it wins the lawsuit, it would be almost impossible to collect a judgment, the plaintiff was forced to accept a settlement on Dr. Jones' terms. This, indeed, is the real value of asset protection via FLPs.

Recourse of A Judgment Creditor: K.O. With A K-1

But what if a plaintiff refuses to settle, prosecutes its lawsuit and wins a humongous judgment against Dr. Jones? The successful plaintiff in this scenario (who is now known as a judgment creditor) is limited to a "charging order."
A charging order entitles the judgment creditor to receive Dr. Jones' share of any distribution of profits or assets made by the FLP. The judgment creditor is still not entitled to reach the assets owned by the FLP. Distributions are, however, made in the sole and absolute discretion of the general partners, Dr. and Mrs. Jones.
As general partners, they may determine never to make a distribution. The FLP may still pay salary to Mrs. Jones, who is not a judgment debtor, and it may make loans to Dr. Jones' children, who also are not judgment debtors. Neither of these payments are "distributions" to Dr. Jones. They are therefore not subject to the charging order and beyond the reach of the judgment creditor.
The judgment creditor's charging order is, however, a poisonous piece of paper, one that will cause the creditor great harm. Although the FLP might never make a distribution, the judgment creditor's right to such distribution makes him liable for the tax on the income he never receives. This is known as the "phantom income doctrine."
The FLP issues a tax form known as a Schedule K-1 to each partner once a year. This Schedule K-1 sets forth that partner's share of FLP income, whether distributed or not. Each partner attaches the Schedule K-1 to his or her income tax return and includes his or her share of FLP income on the tax return, whether distributed or not.
If a creditor obtains a charging order entitling him to Dr. Jones' share of the FLP's distributions, the FLP will issue the Schedule K-1 to that creditor instead of to Dr. Jones.
Pursuant to Revenue Ruling 77-137, the IRS will require the judgment creditor in possession of a charging order to pay tax on Dr. Jones' share of FLP income, even though that income is never distributed!
This has a profound effect in deterring litigants and creditors from bringing lawsuits against defendants like Dr. Jones, whose assets are owned by FLPs.
Dr. Jones' asset protection plan provided him and his family with complete protection from lawsuits, not only by protecting their assets from attack by judgment creditors but, more importantly, by discouraging the lawsuits in the first place.
Injured parties did receive reasonable compensation from Dr. Jones' insurers and left Dr. Jones alone.

A Word About Fraudulent Conveyances

It should be noted that the establishment of an asset protection plan solely to protect assets from existing creditors may be construed as an improper attempt to thwart such creditors. In this regard, a creditor may attack an FLP plan as having been established fraudulently, for the specific purpose of evading debts due to that creditor.
For this reason, clients should establish their asset protection plan before any claims arise against them. If it is too late to do this, clients should at least have another valid purpose, apart from asset protection, as the reason behind their FLP plan. Estate planning and income tax minimization (both of which are discussed below) are such valid purposes.
Thus, it is important to implement an FLP plan in the context of complete estate and tax planning, including the execution of a valid will and the establishment of appropriate trusts. If the FLP plan is included as part of a comprehensive estate and tax plan, creditors will have far less likelihood of successfully arguing that the FLPs were established solely to avoid creditors.
SECOND GOAL: MINIMIZATION OF ESTATE TAXES
As noted earlier, when Dr. and Mrs. Jones pass away, assuming no change in the value of their assets, their estate would be worth five million dollars. The "unified credit" that is currently allowed by law exempts estate assets valued at $1,000,000 per person.
Dr. and Mrs. Jones' combined unified credits of $2,000,000 would reduce the value of their taxable estate to $3,000,000, which would be subject to estate tax at a current rate of approximately 50%. Thus, if Dr. and Mrs. Jones did not set up an FLP plan, $2,000,000 would pass to their heirs free of taxes (via the unified credits), and their heirs would split the remaining $3,000,000 with the government, 50% to the Jones' children ($1,500,000), and 50% to the IRS ($1,500,000).
Clearly, Dr. and Mrs. Jones would like to redirect (legally, of course), as much as possible of the IRS' $1,500,000 to their children.
At this point, it is important to digress from Dr. Jones and his family and consider an important issue: the propriety of tax minimization. There is absolutely nothing immoral, illegal, unethical or even unpatriotic about minimizing your tax obligation.
It is a criminal act to engage in tax evasion or tax fraud. However, the structuring of your assets, through legal means, to pay as little as possible to the IRS and preserve as much as possible for yourself and your family is completely valid and legal.
Consider the comments of Judge Learned Hand, one of the most important federal judges of the last century:
"Over and over again, courts have said that there is nothing sinister in arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich and poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions."
[Commissioner of Internal Revenue v. Newman, 159 F.2d 848 (2d Cir. 1947) (dissenting opinion). See also, Gregory v. Helvering, 293 U.S. 465 (1935)("[T]he legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits cannot be avoided.")]
Family limited partnerships legally save estate taxes by the combined operation of discounting the value of limited partnership interests, and gifting the discounted limited interests. The two principals work together.
First, the value of a limited interest in the FLP is discounted. Once discounted, more FLP interests can be gifted tax-free to the next generation, which results in more assets passing out of an individual's taxable estate. It is important to remember that, as explained above, a limited interest has no right to control the FLP. That right is reserved to the general partners (Dr. and Mrs. Jones), and is never given away.
The principal of discounting recognizes two inherent reductions in the value of a limited interest in a family limited partnership. One reduction in value is due to the fact that a limited interest in an FLP is a non-controlling interest in a family enterprise. A purchaser of such a limited interest would be an outsider and would have no right to expect any distributions from the FLP unless the general partner decided to make one or unless all general partners died and the FLP liquidated.
A second reduction in value is due to the fact that there is no ready market for the purchase and sale of FLP limited interests and therefore no liquidity. The courts have forced the IRS to recognize the validity of these two discounts and such recognition has been codified by the IRS in Revenue Ruling 93-12.
The IRS routinely accepts discounts in values of limited interests in FLPs varying from thirty percent to as high as fifty percent, depending, among other things, on the liquidity of the FLP's assets, the likelihood of a distribution or liquidation and the profitability of the FLP.
It is important to understand that the discount applies to the value of the interest in the FLP; the value of the asset held in the FLP remains the same.
Thus, for example, the Jones family home was worth $1,000,000 before Dr. Jones began his estate planning, and the value of the home remained $1,000,000 after it was contributed to the FLP. If the home was sold, it would command a sale price of $1,000,000 whether or not it was contained within the FLP.
Although the value of the home is preserved, the FLP can accomplish significant estate tax savings via gifting of discounted limited interests in the "Jones Residence Family Limited Partnership." The IRS would recognize a 50% discount in the value of a limited interest in an FLP containing non-liquid assets such as a home.
Thus, although the FLP containing the Jones family home is worth $1,000,000, the value of all the limited interests of the FLP, discounted at a rate of 50% equals $500,000. Assume that Dr. Jones wished to gift as much as possible to his children during his lifetime in order to minimize the value of his estate at death.
Using $500,000 of their combined $2,000,000 unified credit, Dr. Jones and his wife would make a tax-free gift of $500,000 worth of limited partnership interests to their three children. [The unified credit is not exclusively reserved for death; it may instead be used to exempt a gift made during one's life from gift taxes.]
Because of the discounting, this gift would effectively transfer all the limited interests in that FLP out of their estate to their children.
In effect, by making a $500,000 tax-free gift of discounted interests, Dr. and Mrs. Jones transferred 98% of a $1,000,000 partnership, with an actual value of $980,000.
Upon their deaths, Dr. and Mrs. Jones, as 1% general partners, would each own $10,000 worth of partnership interests, but they would have controlled the entire $1,000,000 FLP until the very end. In addition, future appreciation on the value of the limited partnership interests given to the children will be excluded from Dr. and Mrs. Jones' taxable estate.
Dr. and Mrs. Jones used their total combined unified credits ($2,000,000) to make four sets of tax-free gifts of $500,000 worth of discounted limited interests in the following FLPs :
  1. Jones Residence Family Limited Partnership
          - Actual FLP value: $1,000,000
          - Discounted value of limited interests: $500,000
  2. Dr. Jones Apartments Family Limited Partnership
          - Actual FLP value: $1,000,000
          - Discounted value of limited interests: $500,000
  3. Dr. Jones Shopping Center Family Limited Partnership
          - Actual FLP value: $1,000,000
          - Discounted value of limited interests: $500,000
  4. Dr. Jones, M.D., P.C. Family Limited Partnership
          - Actual FLP value: $1,000,000
          - Discounted value of limited interests: $500,000
[In addition to unified credit gifts of limited partnership interests as described above, Dr. and Mrs. Jones may also take advantage of tax-free "exclusionary gifts" of $11,000 worth of limited partnership interests that may be conveyed each year by each parent to as many people as the parent chooses. Thus, Dr. Jones is able to make an annual gift of $11,000 worth of limited partnership interests to each of the three Jones children, and Mrs. Jones may make an identical $11,000 gift each year to each of the three Jones children. These exclusionary gifts of limited partnership interests may take advantage of the same discounting as above. Again, these tax-free gifts of discounted interests totaling $66,000 would effectively remove assets with an actual value of $132,000 from Dr. and Mrs. Jones' taxable estate.]
After these gifts, Dr. and Mrs. Jones each owned 1% of the above-mentioned FLPs as general partner and their children together owned 98% of each FLP as limited partners. In addition, Dr. and Mrs. Jones each still owned 47% (1% general partner interest and 46% limited partner interest) in the Jones Liquid Asset Family Limited Partnership (total FLP value: $1,000,000).
[Dr. Jones owned 1% of the Dr. Jones, M.D., P.C. Family Limited Partnership as general partner and the Jones children together owned 99% of that FLP as limited partners. Mrs. Jones was not a general partner of the Dr. Jones, M.D., P.C. Family Limited Partnership. See footnote 2, supra.]
If they were to die at that time, the total value of their combined taxable estate would be approximately $1,000,000. The estate tax would be approximately $490,000, instead of $1,500,000. [The current estate tax rate on $1,000,000 is approximately 49%.]
Dr. and Mrs. Jones would benefit from an immediate tax savings of more than $1,000,000. In 2004, the unified credit will increase to $1,500,000 per person.
In one more year, Dr. and Mrs. Jones may utilize the increased credit to gift limited interests in the Jones Liquid Asset Family Limited Partnership, again at discounted values, to their children. Thus, in approximately one year, Dr. and Mrs. Jones will each own only 1% of a $5,000,000 estate but control that estate in its entirety and their estate tax liability will be essentially reduced to zero.
In summary, Dr. Jones' second goal -- minimization of estate taxes and preservation of family wealth for his heirs -- is efficiently and completely accomplished by the use of FLPs. Through the principle of discounting, coupled with tax-free gifting of the discounted limited partnership interests, the value of Dr. and Mrs. Jones' taxable estate will be reduced to zero, although they will retain complete control over their assets, as general partners of the FLPs.
Through the implementation of the FLP plan, the Jones children will be able to enjoy all of their parents' wealth, with nothing paid to the IRS.

THIRD GOAL: MINIMIZATION OF INCOME TAX

FLP's accomplish income tax minimization via the principle of "income spreading". The principle of income spreading essentially allows for income to be spread among various partners of the FLP, including children, who are usually in lower tax brackets [income earned by children under 14 years of age is taxed at their parents' income tax bracket; income earned by children over 14 years of age is taxed at the children's own income tax bracket], rather than taxing all of the income at the highest tax bracket of the wealthy parents. ["Income spreading" is available to partnerships actually engaged in business (e.g., owning or managing rental property or owning a controlling interest in a business.)]
Consider, once again, Dr. Jones and his family. Dr. Jones, with income as chief of surgery at the hospital, his private medical practice, his ownership of a shopping center and an apartment building, is taxed at the highest income tax bracket possible. On the other hand, Dr. Jones' teen-aged children are all students and each is in the lowest tax bracket.
When Dr. and Mrs. Jones transferred their assets into FLPs, the FLPs became the owners of the assets. Any income earned on these assets, for example, rental income received from the shopping center and rental income from the apartment building, is no longer directly taxable as Dr. Jones' income, but instead is treated as income of the appropriate FLP. Partnerships, including FLPs, are treated as "flow through" entities for tax purposes.
Income earned by an FLP "flows through" to the general and limited partners of that FLP, and is taxed according to the tax bracket of each respective partner.
As noted above, Dr. and Mrs. Jones gave each of their children a 32.67% interest in each realty FLP. Thus, when the partnership's income "flows through" to each partner, each child will pay income tax at his or her lower bracket on 32.67% of the income earned by that FLP. [The FLP may distribute or lend enough money to each partner to pay the income taxes.]
Dr. and Mrs. Jones will pay income tax at their higher bracket on only 2% of the FLP's income. As a result, there is an overall lower tax on the family's income.
FLP's also allow for another level of income tax minimization, similar to the income tax deduction granted to an individual for contributing to a qualified retirement plan. Since the realty FLPs are engaged in the business of owning and managing rental properties, these FLP's may employ Dr. Jones, Mrs. Jones and each of their children to provide services to the FLP (e.g., management, bookkeeping, rent collection, etc.)
The FLPs can therefore contribute pre-tax dollars to qualified pension plans on behalf of the FLPs' employees. Contributions made by the FLPs to such pension plans would be tax-deductible expenses of the FLPs, reducing the gross income of the FLPs prior to the "flow through" of net income to the individual partners.

CONCLUSION

Family Limited Partnerships allowed Dr. Jones to achieve three very important wealth preservation goals. First, he protected his assets from litigants and creditors and discouraged a variety of potentially severe lawsuits. Second, he eliminated the estate taxes that would be due upon his and Mrs. Jones' deaths, thus preserving the family's entire wealth for their children, rather than paying exorbitant estate taxes to the IRS. Third, he reduced his income tax liability on the income received from his real estate investments.
These goals were achieved expeditiously, professionally and legally by taking advantage of the provisions of the Revised Uniform Limited Partnership Act and the favorable tax treatment of Family Limited Partnerships.


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