This is not the case. Limited partnerships can be used very effectively for estate planning, however, there are many rules to follow. Let me cite you an example of what not to do. Unfortunately in this example, the state where Dad formed the partnership has provisions that state upon the death of a general partner, the partnership is deemed to liquidate within 6 months. Dad never gives away any limited partnership units and, at Dad's eventual death, he will probably receive no discount.
State law is very important in determining the effectiveness of partnership use.
This is a permanent exclusion and not a deferral or rollover of gain until a later time. Additionally, there is no reinvestment required. The taxpayer must have owned and used the property as his or her principal residence for at least 2 of the 5 preceding years. This exclusion may be claimed once every 2 years. The old rule concerning rollover in which a taxpayer sold his home at a gain and purchased a new home at least equal to the selling price of the old home in no longer in effect.