The U.S. Court of Appeals for the Ninth Circuit yesterday affirmed the Tax Court (T.C. Memo. 2005-65) in a § 2036 family limited partnership case. Bigelow v. Commissioner, No. 05-75957 (9th Cir. 9/14/07):

The Estate of Virginia A. Bigelow appeals the decision of the Tax Court upholding a deficiency in the Estate’s federal estate tax return imposed by appellee Commissioner. We consider the applicability of § 2036(a), which recaptures in a decedent’s gross estate the value of certain assets transferred inter vivos. Upon Ms. Bigelow’s death, the Estate filed a federal estate tax return that applied a 37% discount for lack of control and marketability to her remaining interest in a family limited partnership that held a residential property Ms. Bigelow had transferred before her death. The Commissioner filed a notice of deficiency and assessed an additional $217,480.05 in federal estate tax, claiming that the residence’s fair market value, rather than the value of the partnership shares subject to the discount, should be included in the gross estate. The Tax Court affirmed the deficiency determination, finding that Ms. Bigelow and the Bigelow children had an implied agreement that Ms. Bigelow would retain income and economic enjoyment from the transferred asset, and that the inter vivos transfer was not a bona fide sale for adequate and full consideration under § 2036(a). … We affirm.