The Tax Court case of Powell v. Commissioner held that the decedent’s estate owned the assets that the decedent had contributed to a limited partnership because the decedent indirectly retained the power to determine if and when there would be a distribution from the partnership or liquidation of the partnership. This opinion extended the application of Section 2036 to partnerships, stated in the Fifth Circuit Court of Appeals case of Strangi v. Commissioner. In Powell, the decedent did not own a general partner interest. However, the Court held that the decedent was considered to be in control over the general partner, because the general partner was the Agent under the decedent’s Durable Power of Attorney, and as Agent owed a fiduciary duty to the decedent in deciding when to make a distribution from the partnership or cause a liquidation of the partnership.

There appears to be confusion over when the Powell case will apply, what practitioners and clients can safely use planning strategies, and what can be done to avoid applying the Powell result for existing family LLC, limited partnership, and other arrangements.

Learning Objectives:

• Identify the holdings of the Powell and Strangi


• Identify these holdings for the creation of new estate plans for clients


• Identify strategies to help minimize the risk these cases pose to existing family LLCs, limited partnerships, and other entities


• Identify form language that can be used in partnership and operating agreements to help avoid the application of the Powell and Strangi holdings