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Do The Passive Activity Loss Rules Impact The Choice Of A Family Limited Partnership Versus A Family Limited Liability Company For Estate Planning Discount Purposes?

Trusts and Estates

A family limited partnership (FLP) and a family limited liability company (FLLC) are two entity choices frequently used by estate planners to achieve federal estate tax (“estate tax”) savings. While many considerations impact the choice of a FLP versus a FLLC,5 one factor that probably escapes consideration by many practitioners is the impact of the passive activity loss (PAL) rules for Federal income tax (“income tax”) purposes on that choice.

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