TAX COURT OPINION

Case: Bianca Gross, Donor
Docket Number: 9693-06
Judge: Halpern
Opinion Type: memo
Filed: 09/29/2008
Pages: 23

T .C . Memo . 2008-22 1 UNITED STATES TAX COUR T BIANCA GROSS, DONOR, Petitioner COMMISSIONER OF INTERNAL REVEN E, Re onden t Docket No . 9693-06 . Filod Seltomber 29, 2008 . dathryn Keneally and Jeffrey M . MarkA , fo.: Oetitioner . Gerard Mackey , for respondent . MEMORANDUM FINDINGS OF FACT AND OPIINIO N H LPERN, Judge : By notice of defici ncy d ed February 22, 2006 ( he notice), respondent determined defi 'ency i n petiti per's 1998 Federal gift tax of $120,583 . 2 . less otherwise indicated, all secti on references are t o the I ernal Revenue Code in effect for 19 8 . e principal issue for decision is w ethe etitioner's trans r of securities to a family limited part e shi p S~Ep ~EP 2 9 2008 constituted indirect gifts of a portion of those securities to - 2 - the other members of the partnership . FINDINGS OF FAC T Some of the facts have been stipulated and are so found . The stipulation of facts, with accompanying exhibits, is incorporated herein by this reference . At the time she filed the petition, petitioner resided in the State of New York . Background Petitioner, a widow, has two adult children, Diane Gross Marks and Marian Gross . Over the years, petitioner, an investor, has bought and sold securities . By 1998, she had acquired a sizable portfolio of publicly traded securities . Earlier, following her husband's death in 1996, she had begun to consider her own mortality and her desire to involve her daughters in managing what someday would become theirs (i .e ., her securities portfolio) . Because she deemed one of her daughters extravagant, she considered a trust arrangement, but she rejected that because her other daughter declined to serve as a trustee . She settled on a family limited partnership, which she believed would encourage her daughters to work together and learn from her experience while preserving in her (as sole general partner) control over the partnership's assets . She had several discussions with her daughters about the partnership arrangement, culminating in an agreement among - 3 - pet' Toner and her daughters by July 15, N 1998 , form a limited part ership . She and her daughters agr e following : -- Each would contribute a small amo nt cash to th e partnership ($100 from petitione an d 0 from each daughter), and petitioner would c ntri to securities . As the general partner and majori y ow petitione r would retain ultimate control over man ment of the partnership, including the author'ty t ake decisions about sales, purchases, and other disp tions of the partnership's assets, and petitioier w d hav e exclusive discretion concerning t e and amounts of distributions to the partners . - The daughters would not be able t tra interests in the partnership with ut p approval . The daughters could not withdraw ro m nor were they entitled to a retur of t contributions . -- The daughters could not force a diQssol u partnership . - Each partner's interest in the par ners based on the amount of her contri tion the partnership . Dimar Holdings L .P . On July 15, 1998, petitioner caused a certificate of limited partnership for "Dimar Holdings L .P ." (the Dimar certificate and Dimar or the partnership, respectively) to be filed with the New York Department of State . She also caused notice of th e formation of Dimar as a limited partnership to appear in New York newspapers, and, on October 14, 1998, she caused an affidavit of publication to be filed with the New York Department of State . On July 31, 1998, petitioner's daughters each drew checks for $10 to the order of Dimar . On November 16, 1998, petitioner drew a check for $100 to the order of Dimar . From the beginning of October 1998 through December 4, 1998, petitioner transferred ownership of shares of stock from her name to Dimar's name (the Dimar securities) . The Dimar securities were mostly, if not all, common shares of well-known, publicly traded companies . As the redesignated stock certificates were returned to her, she recorded the transfers in a notebook, titled "Dimar", that she maintained to record various transactions with respect to Dimar . By mid-December 1998, petitioner had recorded Dimar's portfolio on a computer program that tracked the performance of the portfolio on a continuous basis . The fair market value of the portfolio on December 15, 1998, was $2,158,646, while the value of all of Dimar's assets on that date was $2,158,766 . The $120 difference was due to the cash contributions from petitioner and her two daughters . - 5 - Dimar filed a Form 1065, U .S . Partnershi p for 1 98 signed by petitioner as general artn r show that Dimar commenced business on Ju y 1 5 The beds of Gif t etitioner and her daughters assembl d f o family holiday eith on or shortly before December 15, 998 . t that meetin g (the December 15 meeting), petitioner and eac h her daughters exec ed a document styled "Deed of Gift" Amon other things, each uch document provides that petitionr is t ansferring to the med daughter a 22 .25-percent intere t as a limited partne r in D ar . The I~mar Partnership Agreement 2lso at the December 15 meeting, petition r and he r daug ers executed a document styled "Limited a tnershi p Agre ent of Dimar Holdings L .P ." (the Dinar agrEement) . ement). Amon g othe things, the Dimar agreement provide that etitioner is the gene al partner, the daughters are limite part rs, the purposes of the partnership include managing the partner ip's investment s in selcirities, limited partners are restri ted th in disposin g of th 'r partnership interests and in withprawi g capital fro m the p tnership, distributions are at th e gener partner, the powers of the partne r hip r to b e exercised by or under the direction of the genera partner, and, excep as specifically provided in the ag r emen r as required by la the limited partners are to take n par 'n th e manag ent of the business and affairs of he p r nership . The Gift Tax Retur n Petitioner filed a Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, for 1998 (the Form 709) on which she reported December 15, 1998, gifts of a 22 .25-percent limited partnership interest in Dimar to each of her daughters . Petitioner reported that the value of each of those gifts was $312,500 . A schedule attached to the Form 709 contains information pertinent to the gifts . It includes a list of the Dimar securities under the heading "Securities Contributed to Partnership on 12/15/98" . It states that the market value of those securities on December 15, 1998, . was $2,158,646 . It includes computations of the partners' capital accounts, showing initial contributions of $100, $10, and $10 for petitioner and her daughters, respectively . It shows that petitioner's capital account was credited in the amount of $2,158,646 because of her contribution of the Dimar securities to the partnership and was then debited in the amount of $960,598 because of her gifts ($480,299 each) to her daughters, whose capital accounts were credited because of the gifts in the amount of $480,299 each . The schedule also shows that the reported value of each gift results from applying an approximately 35-percent discount to a prediscount value of $480,299 for each gift .' The 35-percen t ' The pre-discount value of $480,299 for each gift apparently is derived by applying 22 .25 percent to the reported fair market value of the Dimar securities on Dec . 15, 1998 ($480,299 = 22 .25% x $2,158,646) . dis unt is attributed to "minority interest" , '7lack of control" , - 7 - and 'lack of marketability" . The otic e Following an examination of the For 709 , respondent issue d the tice . The notice explains that res ond e is adjustments givi rise to the deficiency in tax resu te d r m hi s dete ination that petitioner made indire t 9 to each of he r daug :ers of securities when she contribu ed t e Dimar securitie s to D' Mar rather than direct gifts of 22 . 2 -per e t interests in Dima The notice claims that the value f ea h indirect gif t was 80,299 . OPINIO N e must determine whether petitioner made indirect gifts o f secu 'ties to her daughters . Respondent' the r~ of the cas e begi with his supposition that, on December 115,1 1998, thre e even occurred : (1) Petitioner and her aught r s formed Dima r (a f ily limited partnership), (2) each augh t acquired a 22 .25-percent limited partnership interest i n ar, and (3) petiti ner then contributed the Dimar secu itie to th e partne ship (with 22 .25 percent of the val e o f t e contribution, $480, 9, being credited to each daughters ca p t 1 account) . On that sis, respondent concludes that peti Ton e ade an indirect gift $480,299 worth of securities to ea h d a g ter . 2 Taking account of petitioner's an d contributions of $100 , $10, and $10, respe the d ghters' cash tive y responden t (continued . . .) - 8 - Petitioner's theory of the case differs from respondent's principally with respect to the timing of the key events . She argues that Dimar was formed on July 15, 1998, the Dimar securities were all contributed by December 4, 1998, and the gifts (which were of partnership interests) occurred long enough thereafter (on December 15, 1998) that no indirect gift of securities can be supposed . Petitioner also relies on a stipulation that, if the Court finds that, on December 15, 1998, petitioner made direct gifts of limited partnership interests to the daughters, then, taking into account applicable discounts, the value of each gift was $312,500, as petitioner reported on the Form 709 . We 'shall first describe the indirect gift theory . We shall then discuss whether it has any application to the facts before us and resolve any remaining valuation questions . II . Indirect Gift s Section 2501(a) imposes a tax on an individual's transfer of property by gift during the year . The tax is imposed on the value of the gifts made during the year . See sec . 2502(a) . The value of a gift of property is the value thereof on the date of transfer . Sec . 2512(a) . The value of a gift of property is determined by the value of the property passing from the donor and not necessarily by the measure of enrichment resulting to th e z( . . .continued) calculates the indirect gift to each daughter to be $480,315 . But in the notice, he calculated the indirect gifts to be $480,299, and he does not assert an increased deficiency . - 9 - donee from the transfer . Sec . 25 .2511-2( a), G if t Tax Regs . Wher property is transferred for less th in ad q ate and full cons' eration in money or money's worth erea t r, simply , adeq to consideration), then the excess f the alue of th e prop ty transferred over the considerati n received is generally deem a gift . Sec . 2512(b) . The gift t x ap 1'es whether the gift s direct or indirect . Sec . 2511(a) Se t o n 25 .2 1-1(h)(1), Gift Tax Regs ., illustra es a indirect gift made y a shareholder of a corporation t o the t er shareholder s of t corporation . The shareholder tran fers p operty to the corp ation for less than adequate consid rati n The regulation conc des that, generally, such a transfe rep e ents gifts by the areholder to the other individual s arehol ers to th e exte t of their proportionate interests i the corporation . SimilaIrly, if a partner transfers property to alfartnership fo r lesstian adequate consideration, the transfer JEnerally will b e treate as an indirect gift by the transferor t the othe r partn s . See, e .g ., Shepherd v . Commissi ner, 115 T .C . 376, 389 (2000) affd . 283 F .3d 1258 (11th Cir . 200 ) . En eed, i n affir 'ng the Tax Court, the Court of Appe is s i : "[G]ifts to a partn ship, like gifts to a corporation, re d e led to b e indir t gifts to the stakeholders 'to the exte t of their propo ionate interests' in the entity . S e * [sec . 25 .25 . -1(h)(1), Gift Tax Regs .] ." Shephe'd v .ICbmmissioner , 28 3 F .3d ttt 1261 . - 10 - III . Discussio n A . Introductio n Whether petitioner made indirect gifts of securities to her daughters depends on whose version of events we accept : Did all of the relevant events occur on December 15, 1998, as respondent claims, or was Dimar formed and funded a substantial time before as petitioner claims? We begin by examining New York partnership law . Respondent's position is that execution of a partnership agreement is a condition precedent to the formation of a limited partnership under New York law, and, since the Dimar agreement was not executed until December 15, 1998, Dimar did not come into existence until that date . Petitioner counters that Dimar was properly formed as a limited partnership on July 15, 1998, when petitioner caused a certificate of limited partnership for Dimar to be filed with the New York Department of State, or, alternatively, if Dimar did not qualify as a limited partnership until December 15, 1998, then it was a general partnership under New York law as of July 15, 1998 . While the parties skirmish over the date or dates on which petitioner contributed the Dimar securities to Dimar, we think that, if petitioner is right that Dimar was established on July 15, 1998, she is also right that the securities were contributed by December 4, 1998 . Because we think that she is right on both counts, we conclude that petitioner did not make indirect gifts of securities to her daughters . We also agree with petitioner's valuation conclusion . Our reasons follow . - 11 - B . Formation of Dimar 1 . Introductio n ew York limited partnerships formed afte r uly 1, 1991, ar e subj t(cid:127)to the Revised Limited Partnershi Act N .Y . Pship . Law secs . 121-101 through 121-1300 (McKinney 998) In pertinen t part N .Y . Pship . Law sec . 121-201, "Cert fica e of limite d part rship", provides : (a) In order to form a limited pa eneral partners shall execute a par nd a certificate of limited partner xecuted in accordance with section rticle . The certificate * * * shal epartment of state in accordance wi f this article * * * tner h p the ners i hip 21-2 4 of thi s h 11 b e agreement , be i ed with th e h se t on 121-20 6 * (b) A limited partnership is form d at he filing of the initial certificat of l artnership with the department of s ate o later time not to exceed sixty days rom t fling specified in the certificate f lim artnership . The filing of the cert'fica t the absence of actual fraud, be conclusiv e ip a t e formation of the limited partners exce t of filing or effective date if later, y t h a tion or special proceeding brought t i e time of ite d at any date of e d shall, in vidence of of the tim e in an attorne y neral . Addit' nally, subsection (c) of N .Y . Pship . Law s ec . 121-201 conta' s a publication requirement that mu st be s tisfied within 120 d s after the filing of the certifica to of 1 'mite d partn ship . 2 . Discussio n titioner caused the Dimar certifica e to b filed with the New Y k Department of State on July 15, 1 98, an m neither party argue that the publication requirement fo nd i Y . Pship . Law - 12 - sec . 121-201(c) is unsatisfied . Petitioner and her daughters did not, however, execute the Dimar agreement until December 15, 1998 . As stated, respondent argues that execution of a partnership agreement is a condition precedent to the formation of a limited partnership pursuant to New York partnership law . See N .Y . Pship . Law sec . 121-201(a) . He argues, therefore, that Dimar did not come into existence until December 15, 1998 .3 Petitioner argues that New York partnership law attaches no limitation to the time in which the partnership agreement must be executed, and she directs us to the language in N .Y . Pship . Law sec . 121-201(b) providing that, except in circumstances not applicable here : "The filing of the certificate shall * * * be conclusive evidence of the formation of the limited partnership as of the time of filing or effective date if later" . Noting that the publication requirement found in N .Y . Pship . Law sec . 121-201 cannot be satisfied until after the certificate of limited partnership is filed, petitioner argues : "The Act thus contemplates that a limited partnership may be formed before all statutory formalities are completed ." Continuing that the Dimar certificate did not contain a delayed effective date, petitione r 3 Respondent argues on brief that, because the Dimar agreement was signed more than 60 days after the Dimar certificate was filed, see N .Y . Pship . Law sec . 101-201(b) (McKinney 1998), it "is * * * questionable whether Dimar was validly formed under New York law ." The argument that Dimar was not formed is inconsistent with the basis of respondent's adjustment in the notice that petitioner made an indirect gift to her daughters when she contributed the Dimar securities to the partnership . Nor has respondent pled an alternative basis for the deficiency he determined . We do not further consider the argument that Dimar was not validly formed . - 13 - arg s that Dimar was formed on July 15, 1998, J t he date th e certificate was filed . either party makes a compelling arg ment I f or thei r inter retation of New York partnership l a an e have found no persoisive authority on our own . Since w agr e with petitione r that were we to conclude that the Dimar gree e t was not timely exec ed so as to constitute Dimar a limi ed p r nership on July 15, 98, we must consider whether New Yo k la ould dee m peti oner and her daughters to have for m d a e eral partnershi p on t t date, we shall proceed to that co sides}a$ion . nder New York law, when parties se e ing to form a limited part rship do not satisfy the requiremen s ne e sary to form a limi d partnership, they may be deemed t have ormed a genera l part rship if their conduct indicates th t the have agreed , whet r orally and whether expressly or implied , on all th e essenltlial terms and conditions of their p rtner ip arrangement . Peerless Mills, Inc . v . AT&T Co . , 527 F . 2 445, 449 n .1 (2d Cir . 1975)~ ;J Canet v . Gooch Ware Travelstead , 91~7 F . u p . 969, 99 4 (E .D . Y . 1996) . We agree with petitioner that t e recor d conta' is sufficient evidence for us to con lude t at, at the time petit' ner caused the Dimar certificate to be f l d on July 15, 1998, he and her daughters had agreed to orm artnership essen ally on the terms set forth in the imar a reement . Petit ner and her daughters gave uncontra icte estimony that they d agreed upon the essential terms a d cord tions of their party ship arrangement just before the fi ing f the Dimar - 14 - certificate . We have set forth those terms and conditions in our findings of fact, and they are consistent with the terms and conditions of the Dimar agreement . The daughters made their $10 cash contributions on July 31, 1998, and petitioner began contributing securities to the partnership no later than November 10, 1998, and made her $100 cash contribution on November 16, 1998 . She contributed the bulk of the Dimar securities to the partnership by the end of November 1998 . Petitioner kept a record of her contributions in a notebook titled "Dimar", and she kept computer records of the performance of the Dimar portfolio . Petitioner signed an income tax return for Dimar on April 5, 1999, reporting that Dimar commenced business on July 15, 1998 . Together, petitioner's and her daughters' testimony and their conduct indicate to us that, on July 15, 1998, they agreed to all the essential terms of their partnership arrangement, and we so find . If they failed to satisfy the requirements necessary to form a limited partnership, we deem them to have formed a general partnership on that date and on those terms . 3 . Conclusio n Dimar was formed as a partnership on July 15, 1998 . C . Contribution of the Dimar Securitie s We have found that, from the beginning of October 1998 through December 4, 1998, petitioner transferred the Dimar securities from her name to Dimar's name . Respondent can have no quarrel with that finding since it is based on a stipulation . Nevertheless, respondent argues that, since Dimar was not formed - 15 - 1 December 15, 1998, petitioner could not a we contribute d securities to an entity that did not yet e i t . Responden t at a s thedule attache d to t Form 709 includes a list of Dimar ecur t~es under th e heading "Securities Contributed to the Pa tner h'p on 12/15/98" . Peti oner relies on the argument that Di ar was formed on July 15, 98, whether as a limited or general part re ship, and the sche le in question was included with th For 09 solely i n supp t of the valuation of the partners' capita accounts on Dece er 15, 1998 . Petitioner argues tha the s hedule wa s clea y intended to be a list of the secu itie all contributed by p 1 itioner before December 15, 1998) h ld b ID imar on that date nd was not intended to show that th secur ties had, in fact, been contributed on that date . Con ideri the Form 709 a s a wh le, petitioner is convincing as to t e purs e of th e sche ule, and we have already concluded t at D i r was formed on July 15, 1998 .4 We conclude that petition r co t ibuted th e Dimar securities to Dimar during a period omme c ing in earl y Octob 1998 and ending on December 4, 1998 . In further support of his claim th t t h imar securities were t contributed to the partnership un it D c respo lent points out that a schedule atta hed t o filed y petitioner shows that as of Dec . 5, 1') 9 capit account reflected the full value o the D notwi standing that the partnership had e joy e appre ation in its portfolio that should 'n part refle ed in the values of the daughters' apit 1 Petit ner responds that, after petitioner s co t Dimar ecurities and before she made gifts of l m inter is to the daughters, the daughters' comb -i n the a reciation was slight (less than 0 .1 perc n failu to allocate the appreciation may b ign r 15, 1998 , the Form 709 petitioner's mar securities 41,107 of net have bee n accounts . ribution of the ted partnershi p pd interest in t), and th e d . We agree . - 16 - D . Indirect Gifts 1 . Introductio n Respondent argues that petitioner made indirect gifts to her daughters because she contributed the Dimar securities to Dimar for inadequate consideration . She received inadequate consideration, respondent argues, because, proportionate to her interest in the partnership, only 55 .50 percent of the value of the securities was credited to her capital account . She made indirect gifts to her daughters, respondent continues, because, proportionate to their interests in the partnership, the remaining value of the securities was credited to their capital accounts (22 .25 percent apiece) . Respondent assumes that petitioner's transfer of interests in Dimar to her daughters either preceded her contribution of the Dimar securities to Dimar or should be deemed to have preceded that contribution under the step transaction doctrine . Petitioner argues that she made no indirect gift of any portion of the Dimar securities to her daughters since (1) 100 percent of the value of the Dimar securities was credited to her capital account well in advance of her gifts of interests in Dimar to her daughters, and (2) no grounds exist to reorder those steps under the step transaction doctrine . 2 . Indirect Gifts in Fac t In Estate of Jones v . Commissioner , 116 T .C . 121, 123-127 (2001), the decedent had formed two family limited partnerships with his children and had contributed assets to the partnerships - 17 - in exchange for substantially all of the limited partnership interests in the partnerships . His contribution were credite d to h' capital accounts . On the day the artn r hips wer e form , petitioner gave to his children s bsta t ally all of his inte sts in the partnerships . The deced nt rep rted the gifts for deral gift tax purposes, discountin the v lues of the gift 3 substantially on account of lack of mark Et bility and fo r othe reasons . In the case before us (th est t tax case), the Comm sioner argued that the sizable disc unts a plied to th e gift indicated that the decedent had mad tax b e gifts upon cont buting his property to the partners ips t e gifts being equa in value to the difference between he v al e of th e prop ty contributed and the value of the limite partnership inte sts received) . We found that the c ntri u ions of property were roperly reflected in the capital accounts f the decedent, and e value of the other partners' inte est s s not enhanced by t decedent's contributions . Id . at erefore, w e held, the contributions did not constitu t e gifts . Id . In Shepherd v . Commissioner , 115 T .C . -381, the taxp er transferred real property and s t newly forme d fami partnership in which he was a 50-p rcen t wner and his two sons were each 25-percent owners . Rather than l locatin g contri utions to the capital account of t e con : ibuting partner, the partnership agreement provided that any con :r ibutions would be all cated pro rata to the capital accounts o E each partne r accord ng to ownership . Because the contr'buti n s were reflected - 18 - partially in the capital accounts of the noncontributing partners, the value of the noncontributing partners' interests was enhanced by the contributions of the taxpayer . Therefore, we held, the transfers to the partnership were indirect gifts by the taxpayer to his sons of undivided 25-percent interests in the real property and stock . Id . at 389 . We have concluded supra in section III .B .2 . and C . of this report that Dimar was formed as a partnership on July 15, 1998, and that petitioner transferred the Dimar securities to Dimar during a period commencing in early October 1998 and ending on December 4, 1998 . Petitioner testified, and her daughters confirmed, that, as she contributed the Dimar securities to Dimar, her percentage interest in the partnership increased and theirs decreased . A schedule attached to the Form 709 shows that petitioner's capital account was increased because of her contribution of the Dimar securities to the partnership and was then decreased because of her gifts to her daughters, whose capital accounts were increased on account thereof . The parties agree that petitioner made gifts to her daughters on December 15, 1998 . The contributions of property in the case at hand are similar in form to the contributions in Estate of Jones and are distinguishable in form from the gifts in Shepherd . Petitioner made a series of contributions of securities to Dimar and received increasing partnership interests in return . All of the contributions were reflected in her capital account, and the - 19 - val e of her daughters' capital account s as n of h e contributions . After she contrib u ed t t e enhanced becaus e Dimar securitie s to t partnership, she made gifts of in t res t ' n th e par t rship to her daughters . efore concluding that form and sub s anc e shal consider respondent's step transac t on a 3 . Indirect Gifts Under the Step Tran he step transaction doctrine embod i s s u a g a s ree, however, w e ment . tion Doctrin e ance over form prin pies ; it treats a series of formall sep r to steps as a sing transaction if the steps are in su stanc e integrated , int e ependent, and focused toward a par t cula i esult . Where a n int e ach i dete elated series of steps are taken p u suan t o a plan t o e an intended result, the tax cons e uenc e are to b e ined not by viewing each step in is latio , but b y consi dering all of them as an integrated hole . Holman v . Commi s sioner, 130 T .C . - (2008) (slip op . it 26) (citation s and q tation marks omitted) . lman is a family limited partnershi cas in which th e taxpa rs made the first of a series of g s o imite d partn ship interests 6 days after forming and u ding th e partn ship with shares of a publicly trad d comp ny . Id . a t (slip p . at 27-28) . We described the Co issi n is argumen t with spect to that gift as being that th tax a ers' "formatio n and f ding of the partnership should be t eate s occurring simul neously with * * * [the gift] since the v nts wer e inter4opendent and the separation in time Ietwe€nlthe first two - 20 - steps (formation and funding) and the third (the gift) served no purpose other than to avoid making an indirect gift under section 25 .2511-1(h), Gift Tax Regs ." Id . at (slip op . at 27) . Without intending to draw any bright lines, we rejected the Commissioner's argument because of our conclusion that the taxpayers bore a real economic risk of a change in value of the partnership for the 6 days that separated their transfer of the shares to the partnership and the gift . Id . at (slip op . at 30) . We concluded : "[W]e shall not disregard the passage of time and treat the formation and funding of the partnership and the subsequent gifts as occurring simultaneously under the step transaction doctrine ." Id . at (slip op . at 31) . We reach the same result here, where (1) 11 days passed between petitioner's conclusion of her transfer of the Dimar securities to the partnership and her gifts of interests in the partnership to her daughters, and (2) the Dimar securities were mostly, if not all, common shares of well-known companies .' The step transaction doctrine does not cause us to change the actual order of the transactions before us and conclude that petitioner made indirect gifts of 22 .25 percent of the value of the Dima r 5 We caution, however, in terms similar to those as we used in Holman v . Commissioner , 130 T .C . , n .7 (2008) (slip op . at 31) : The real economic risk of a change in value arises from the nature of the Dimar securities as heavily traded, relatively volatile common stocks . We might view the impact of a 11-day hiatus differently in the case of another type of investment ; e .g ., a preferred stock or a long-term Government bond . f the ctions here in question accords wits the . r substance . 4 . Conclusio n December 15, 1998, petitioner mad gif s of interests in o her daughters and did not make i dire t gifts of ns of the Dimar securities that she had o tributed to th e rship . fail part Sec . tha t petit 15, 1 th e gener circ u term i partn as a petit gene r limit limit Commi tran s taxpa famil partn and s Respo ruled conv e 84-52 , (trea into partn We have deemed that, if petitioner an d to satisfy the requirements necess ry to rship, they formed a general partne ship II .B .2 . of this report, supra . Res onde n imar came into existence, as a'limi ed p a ner and her daughters signed the D' ar a 98 . The parties have not explored the t o e daughter s orm a limited July 15, 1998 . s position i s t~nership, whe n eement on Dec . consequences o f ar agreement being effective to co ert to a limited partnership . Sec . 708(b) ( tances under which a partnership wi 1 be ted . If Dimar were considered as t rmin ship before being reconstituted and r t h mited partnership, then respondent fight ner received the Dimar securities f om t partnership before contributing th m to partnership while, at the same tim , ma partnership interests to her daugh ers . ioner , 433 F .3d 1044 (8th Cir . 2006 (r e tion doctrine in affirming the Tax ourt rs made indirect gifts of shares of stoc limited partnerships since transfer of ships and gifts of partnership inte ests ultaneous transactions), affg . T .C . Memo ent has perhaps not made that argum nt b hat, generally, a partnership does of t ion from a general to a limited par ners 1984-1 C .B . 157 ; see also Rev . Rul . 95- 3 ng the conversion of an interest in a d o interest in a domestic L .L .C . that is c l ship as a partnership to partnershi con ar from a provides th e considered a s t d as a genera l imar agreemen t gue that terminated e reconstituted g gifts o f ee Senda v . ng on the step finding that o partners in urities t o re integrated 004-160 . use he ha s mate upon it s Rev . Rul . 1995-1 C .B . 130 tic partnership sified as a sion) . E . Valuatio n - 22 - The parties have stipulated that, if petitioner is found by the Court to have made gifts of limited partnership interests in Dimar to her daughters on December 15, 1998, then petitioner was correct in reporting the value of each of those gifts as $312,500 on the Form 709 . We have found only that, on December 15, 1998, petitioner made gifts of interests (not necessarily limite d partnership interests) in Dimar to her daughters . Petitioner's expert witness gave uncontradicted testimony that, if Dimar were a general rather than a limited partnership, and petitioner and her daughters had agreed that the daughters would be subject to the same limitations as set forth in the Dimar agreement, viz, neither daughter could dispose of all or any portion of her interest in the partnership, neither would have the right to withdraw either her capital or participation in the partnership or to receive distributions from the partnership, and neither would have control of management or the business and affairs of the partnership, then the fair market value of a 22 .25-percent interest in the partnership received by each of the daughters would be worth the same as a 22 .25-percent limited partnership interest in a limited partnership governed by the Dimar agreement . He pegged that value as $277,868 . Petitioner states, however, that she is not claiming a value for the gifts any less than the value ($312,500) reported on the Form 709 . - 23 - W e have found that, by the time petij tione~ c aused the Dima r cert if icate to be filed on July 15, 1998, she n d her daughter s had reed to form a partnership essentia ly o t he terms se t fort in the Dimar agreement . On the bas s of p titioner' s expe witness's uncontradicted testimony we i d that, if, o n Dece er 15, 1998, Dimar was a general pa tner h p, the fai r mark value of the interest in the partn rshi hat petitione r gave t o each of her daughters was $312,5 0 IV . onclusio n o reflect the foregoing, D-c i s i c~n will be entere d for pet itionlek