Under the IRS' expansive reading of Trenchard and Bosca , two unrelated individuals may be subject to gift taxes if they contribute assets to a partnership or LLC in a pure business setting. Certainly there is no donative intent in the situation in which a landowner contributes real estate and a developer contributes cash to an LLC for the purpose of developing the real estate, although each receives LLC membership interest in exchange for his or her contribution. There are several methods to avoid a gift on the formation of an entity. First, the lawyer and the family could ensure that the formation of the entity is done for a valid business purpose, with bona fide, arm's length transactions. If so, the Treasury Regulations protect the transaction from the imposition of gift taxes.
Independent appraisals can help support the bona fide, arm's length nature of the transaction.
The lawyer could structure the arrangement so that the donor can liquidate the entity following the transfer of property by the donor to it. Thus, the donor receives an interest in the new entity with a fair market value equal to the property contributed. This can be accomplished in one of several ways. If the donor is the general partner, the general partner could have the power to liquidate the entity, thereby returning to the donor the property that the donor transferred to the entity. Another approach is to use a corporation or an LLC as the general partner and give the donor control of the general partner.