                                                             United States Court of Appeals
                                                                      Fifth Circuit
                                                                   F I L E D
                           REVISED AUGUST 8, 2005
                                                                     July 15, 2005
               IN THE UNITED STATES COURT OF APPEALS
                                                               Charles R. Fulbruge III
                           FOR THE FIFTH CIRCUIT                       Clerk
                           _____________________

                               No. 03-60992
                           _____________________

ALBERT STRANGI, Deceased,
Rosalie Gulig, Independent Executrix,

                                                   Petitioner - Appellant,

                                   versus

COMMISSIONER OF INTERNAL REVENUE,

                                            Respondent - Appellee.
__________________________________________________________________

      Appeal from a Decision of the United States Tax Court

_________________________________________________________________

Before REAVLEY, JOLLY, and PRADO, Circuit Judges.

E. GRADY JOLLY, Circuit Judge:

     This case, which comes before us now for a second time,

involves an assessment by the Commissioner of Internal Revenue of

an estate tax deficiency against the Estate of Albert Strangi.

Initially, the Tax Court held for the Estate. However, we remanded

to the Tax Court, which reversed its prior holding and decided the

case under    I.R.C.   §    2036(a).     Section   2036(a)   provides    that

transferred   assets   of     which    the   decedent   retained   de   facto

possession or control prior to death are included in the taxable

estate.   The Tax Court held that Strangi retained enjoyment of the

assets in question, and thus, that the transferred assets were
properly included in the estate.                The Estate now appeals that

decision.   We find no reversible error, and accordingly AFFIRM.

                                         I

     As failing health began to telegraph that the inevitable would

occur, Albert Strangi transferred approximately ten million dollars

worth of personal assets into a family limited partnership.                 Upon

his death, Strangi’s Estate filed an estate tax return based on the

value of his interest in that partnership, as opposed to the actual

value of the transferred assets.               The Internal Revenue Service

issued a notice of a deficiency of $2,545,826 in estate taxes.

Strangi’s Estate petitioned the Tax Court for a redetermination of

the deficiency.

     After protracted litigation, the Tax Court found that Strangi

had retained an interest in the transferred assets such that they

were properly     included   in    the       taxable   estate   under   I.R.C. §

2036(a), and entered an order sustaining the deficiency.                     Our

review of the Tax Court’s decision requires an inquiry into the

structure of the limited partnership established by Strangi and the

extent to which he retained enjoyment of partnership assets.

First, however, some account of antecedents is in order.

                                         A

     Albert Strangi died on October 14, 1994 in Waco, Texas.                  He

was survived by four children from his first marriage:                   Jeanne,

Rosalie,    Albert   Jr.,    and   John        (collectively,     the   “Strangi



                                         2
children”).     Rosalie was married to Michael J. Gulig, a local

attorney.

     In 1965, after divorcing his first wife, Strangi married

Delores Seymour. Seymour had two daughters, Angela and Lynda, from

a prior marriage (collectively, the “Seymour children”).         In 1987,

Strangi and Seymour both executed wills, naming one another as

primary beneficiaries and the Strangi and Seymour children as

residual beneficiaries.     That same year, Seymour began to suffer

from a series of medical problems.          As a result, Strangi and

Seymour decided to move their residence from Florida to Waco,

Texas.    To facilitate the relocation, Strangi executed a general

power of attorney naming Gulig as his attorney-in-fact.

     In July 1990, Strangi executed a new will, naming the Strangi

children as sole beneficiaries if Seymour predeceased him –- i.e.,

cutting   out   the   Seymour   children.   The   new   will   designated

Strangi’s daughter Rosalie and a bank, Ameritrust, as co-executors

of the Estate.    Seymour died in December 1990.

     In 1993, Strangi began to experience health problems.         He had

surgery to remove a cancerous mass from his back, was diagnosed

with a neurological disorder called supranuclear palsy, and had

prostate surgery.      At this point, Gulig took over management of

Strangi’s daily affairs.

     Gulig testified that, on several occasions between 1990 and

1993, he discussed his concerns regarding Strangi’s Estate with

retired Texas probate Judge David Jackson, who was a personal

                                    3
friend.     Gulig said that he felt “confident” that the Seymour

children would either sue Strangi’s Estate or contest the will. He

also claimed to have been concerned about “horrendous executor

fees” that he believed Ameritrust would charge.                   Further, Gulig

said he worried about the possibility of a tort claim by Strangi’s

housekeeper for injuries she sustained in an accident while caring

for Strangi.     He testified that Judge Jackson advised him that his

fears were “very valid” and that he “had to do something” to

protect the Strangi Estate.

                                         B

     On August 11, 1994, Gulig attended a seminar provided by

Fortress Financial Group, Inc., explaining the so-called “Fortress

Plan”.     The Fortress Plan was billed as a means of using limited

partnerships as a tool for (1) asset preservation, (2) estate

planning, (3) income tax planning, and (4) charitable giving.

Fortress marketed the plan as a means of, among other things,

“lower[ing] the taxable value of your estate” by means of “well

established court doctrines which recognize that the value of a

limited partnership interest is worth less than the value of the

assets owned by the limited partnership”. In brief, the plan

instructed parties to “sell” their assets in exchange for an

interest    in   a   newly-created   limited        partnership.      Because     a

partnership      interest   is   worth       less   for   tax   purposes   than   a

proportional share of the partnership’s assets –- due to lack of



                                         4
direct control and non-liquidity -- this “exchange” would reduce

the taxable value of the estate.

           The next day, Gulig, acting under power of attorney on behalf

of Strangi: (1) prepared the Agreement of Limited Partnership of

the Strangi Family Limited Partnership (“SFLP”); (2) prepared and

filed the Articles of Incorporation of Stranco, Inc. (“Stranco”);

(3) transferred 98% of Strangi’s assets1 –- valued at $9,932,967 –-

to SFLP in exchange for a 99% limited partner interest; (4)

transferred $49,350 of Strangi’s assets to Stranco in exchange for

47% of Stranco’s common stock; (5) facilitated the purchase of the

remaining        53%   of    Stranco’s    common       stock     by   the   four   Strangi

children for $55,650; (6) issued a check from Stranco for a 1%

general partner interest in SFLP.

       The result of Gulig’s efforts was a three-tiered entity, with

SFLP       –-   and    the   roughly     $10   million      in    assets    Strangi   had

transferred into it –- at the top.                 The SFLP partnership agreement

provided        that    Stranco,   which       owned    a   1%    general    partnership

interest in SFLP, had sole authority to conduct SFLP’s business

affairs.        Strangi owned a 99% interest in SFLP, but was a limited

partner, and thus had no formal control.


       1
       The assets that Strangi transferred to SFLP included, inter
alia, (1) brokerage accounts at Smith Barney and Merrill-Lynch
valued at $7.4 million; (2) an annuity valued at $276,000; (3) two
life insurance policies valued at a total of $70,000; (4) two
houses in Waco; (5) a condominium in Dallas; (6) a commercial
warehouse in Dallas; and (7) several limited partnership interests,
valued at approximately $400,000.

                                               5
     Stranco itself was a Texas corporation.      Strangi owned 47% of

Stranco’s common stock; each of his four children owned a 13%

share.   Stranco’s articles of incorporation named Strangi and the

four Strangi children as the initial board of directors.     On August

17, the five met to execute the corporate bylaws, a shareholder

agreement, and an authorization to employ Gulig as manager of

Stranco.

     On August 18, Stranco made a corporate gift of 100 shares –-

a 1/4 of one percent stake –- to the McLennan Community College

Foundation. Gulig later testified that he understood that the gift

would improve the asset protection features of the Stranco/SFLP

structure.   The implementation of the “Fortress Plan” was thus

completed.

     Following Strangi’s death in October 1994, Gulig asked Texas

Commerce Bank (“TCB”, a successor in interest to Ameritrust) to

decline to serve as executor of the Estate.        To that end, Gulig

claims to have issued a “threat that no distributions would be made

from SFLP to pay executor fees”.       After receiving indemnification

from the Strangi children, TCB agreed. Strangi’s will was admitted

to probate in April 1995 with Rosalie Gulig as the sole executor.

                                   C

     Both prior to and after Strangi’s death, SFLP made various

outlays, both monetary and in-kind, to meet his needs and expenses.

In September and October of 1994, SFLP distributed $8,000 and

$6,000, respectively, to Strangi.        On both occasions, SFLP made

                                   6
proportional distributions –- $80.81 and $60.61, to be precise –-

to its general partner, Stranco.              The Commissioner suggests that

these   payments   to    Strangi      were    necessary    because,     after    the

transfer to SFLP, Strangi retained possession of only minimal

liquid assets –- i.e., two bank accounts with funds totaling $762.

The Estate responds by noting that Strangi received a monthly

pension of $1,438 and Social Security payments of $1,559, and that

he retained over $187,000 in “liquefiable” assets, which consisted

largely of various brokerage accounts.

     SFLP also distributed approximately $40,000 in 1994 to pay for

funeral expenses,       estate       administration      expenses,     and    various

personal debts that Strangi had incurred.                In 1995 and 1996, SFLP

distributed approximately $65,000 to pay for Estate expenses and a

specific   bequest      made   by     Strangi.     Moreover,      in    1995,    SFLP

distributed $3,187,800 to the Estate to pay federal and state

inheritance   taxes.           The    Estate     notes    that    all    of     these

disbursements were recorded on SFLP’s books and accompanied by pro

rata distributions to Stranco.            The Estate further notes that it

repaid SFLP for the $65,000 “advance” in January 1997.

     In addition, prior to his death, Strangi continued to dwell in

one of the two houses he had transferred to SFLP.                The Estate notes

that SFLP charged rent for the two months that Strangi remained in

the house. Although the accrued rent was recorded in SFLP’s books,

it was not actually paid until January 1997, more than two years

after Strangi’s death.

                                          7
                                        D

       In December 1998, the Internal Revenue Service issued a notice

of deficiency to the Estate, asserting that it owed $2,545,826 in

federal estate tax or, in the alternative, $1,629,947 in federal

gift       tax.     The   deficiency    was    attributable      to    the   IRS’s

determination that Strangi’s interest in SFLP was $10,947,343 –-

i.e., the actual value of the assets transferred –- rather than the

$6,560,730 that the Estate reported.2

       The Estate petitioned the Tax Court for a redetermination of

the deficiencies.         In the Tax Court, the Commissioner of Internal

Revenue contended, inter alia, that (1) SFLP should be disregarded

because it lacked economic substance and business purpose; (2) the

partnership agreement was a restriction on the sale or use of the

underlying        property   that   should    be   disregarded   for    valuation

purposes; (3) the fair market value of Strangi’s partnership

interest was understated; and (4) if a discount was appropriate,

Strangi had made a taxable gift on formation of SFLP to the extent

the value of the property transferred exceeded the value of his

partnership interest.



       2
       The basis for the discrepancy in this case –- and the
primary rationale for the use of family limited partnerships
generally –- is the IRS’s practice of permitting discounts in the
taxable value of an estate based on a lack of marketability or
control of estate property. See 26 C.F.R. § 20.2031-1(b) (“The
value of every item of property includible in a decedent's gross
estate ... is its fair market value at the time of the decedent's
death ...”).

                                        8
      Prior to trial, the Commissioner filed a motion for leave to

amend his answer to include the alternative theory that, under

I.R.C. § 2036(a), Strangi’s taxable estate should include the full

value of the assets he transferred to SFLP and Stranco.            The Tax

Court denied the motion.      After a two-day trial, the court held for

the Estate, rejecting all of the Commissioner’s proffered reasons

for   inclusion    of   the   assets.      See   Estate   of   Strangi    v.

Commissioner, 115 T.C. 478 (2000) (“Strangi I”).

      The Commissioner appealed, inter alia, the denial of the

motion to amend his answer.          This court affirmed in part and

reversed in part, and remanded the case to the Tax Court with

instructions that it either “set forth its reasons for ... denial

of the Commissioner’s motion for leave to amend” or “reverse its

denial of the Commissioner’s motion, permit the amendment, and

consider the Commissioner’s claim under § 2036". Estate of Strangi

v. Commissioner, 293 F.3d 279, 282 (5th Cir. 2002).

      On remand, the Tax Court opted to permit the amendment.            The

parties submitted additional briefs on the § 2036(a) issue and the

Tax Court entered its opinion in May 2003, finding in favor of the

Commissioner,     and   upholding   the   initially-assessed   estate    tax

deficiency. See Estate of Strangi v. Commissioner, T.C. Memo 2003-

145 (2003) (“Strangi II”).      The Estate now appeals the decision of

the Tax Court.

                                     II



                                      9
     The Strangi Estate advances two primary arguments. Both hinge

on the application of I.R.C. § 2036(a) to the facts at hand.

Section 2036(a) provides:

            The value of the gross estate shall include
            the value of all property to the extent of any
            interest therein which the decedent has at any
            time made a transfer (except in the case of a
            bona fide sale for an adequate and full
            consideration in money or money’s worth), by
            trust or otherwise, under which he has
            retained for his life or for any period not
            ascertainable without reference to his death
            or for any period which does not in fact end
            before his death

                  (1)   the possession or enjoyment of,
                        or the right to the income
                        from, the property, or

                  (2)   the right, either alone or in
                        conjunction with any person, to
                        designate the persons who shall
                        possess or enjoy the property
                        or the income therefrom.

     First, the Estate contends that the Tax Court erred in holding

that Strangi retained “possession or enjoyment” of the property he

transferred to SFLP or the right to designate who would possess or

enjoy it.    If Strangi did not retain such an interest, § 2036(a)

does not apply.    Second, the Estate contends that, even if Strangi

retained possession or enjoyment of the assets, the Tax Court erred

in holding that the transfer did not fall within the “bona fide

sale” exception to § 2036(a).

                                    A




                                   10
       The core of the Estate’s argument on appeal is that the Tax

Court erred in concluding that Strangi retained possession or

enjoyment of the assets he transferred to SFLP.            It follows, the

Estate contends, that the Tax Court erred in holding that the

assets were includible in the taxable estate under § 2036(a).

       Section 2036(a) is one of several provisions of the Internal

Revenue Code intended to prevent parties from avoiding the estate

tax by means of testamentary substitutes that permit a transferor

to retain lifetime enjoyment of purportedly transferred property.

See Estate of Lumpkin v. Commissioner, 474 F.2d 1092, 1097 (5th

Cir.   1973).    Specifically,   §    2036(a)   provides    that   property

transferred by a decedent will be included in the taxable estate

if, after the transfer, the decedent retains either (1) “possession

or enjoyment” of the transferred property; or (2) “the right ... to

designate the persons who shall possess or enjoy the property or

the income therefrom”.

       A transferor retains “possession or enjoyment” of property,

within the meaning of § 2036(a)(1), if he retains a “substantial

present economic benefit” from the property, as opposed to “a

speculative contingent benefit which may or may not be realized”.

United States v. Byrum, 408 U.S. 125, 145, 150 (1972).                  IRS

regulations further require that there be an “express or implied”

agreement “at the time of the transfer” that the transferor will




                                     11
retain possession or enjoyment of the property.                        26 C.F.R. §

20.2036-1(a).

     In the case at bar, the benefits retained by Strangi –-

including, for example, periodic payments made prior to Strangi’s

death, the continued use of the transferred house, and the post-

death payment     of    various    debts      and   expenses    –-   were   clearly

“substantial”    and    “present”,       as    opposed   to    “speculative”     or

“contingent”.3        As such, our inquiry under § 2036(a)(1) turns

solely on whether there was an express or implied agreement that

Strangi would retain de facto control and/or enjoyment of the

transferred assets.

     The Commissioner does not suggest that any express agreement

existed.     Thus, the precise question before us is whether the

record supports the Tax Court’s conclusion that Strangi and the

other shareholders of Stranco –- that is, the Strangi children –-

had an     implicit    agreement    by   which      Strangi    would    retain   the

enjoyment of his property after the transfer to SFLP.4

     3
       See Byrum, 408 U.S. at 146-47 (A substantial present
interest exists in “situations in which the owner of property
divested himself of title but retained an income interest or, in
the case of real property, the lifetime use of the property”.).
     4
       As the Tax Court explained, § 2036(a) includes within the
taxable estate any asset that is not transferred “absolutely,
unequivocally, irrevocably, and without possible reservations”.
Strangi II, T.C. Memo 2003-145 (quoting Commissioner v. Estate of
Church, 335 U.S. 632, 645 (1945)). The controlling question for
present purposes, then, is not whether Strangi actually kept any
particular asset in his possession, but whether he received a
general assurance that his assets would be available to meet his
personal needs.

                                         12
     The    Tax   Court’s   determination   that   an   implied   agreement

existed is a finding of fact and is reviewed only for clear error.

See Maxwell v. Commissioner, 3 F.3d 591, 594 (5th Cir. 1993).              A

factual finding is not clearly erroneous if it is plausible in

light of the record read as a whole.        See, e.g., United States v.

Villanueva, 408 F.3d 193, 203 (5th Cir. 2005).            As such, we will

disturb the Tax Court’s findings of fact only if we are “left with

the definite and firm conviction that a mistake has been made”.

Otto Candies, L.L.C. v. Nippon Kaiji Kyokai Corp., 346 F.3d 530,

533 (5th Cir. 2003) (quoting Allison v. Roberts (In re Allison),

960 F.2d 481, 483 (5th Cir. 1992)).

     The Tax Court, in its memorandum opinion, presented a litany

of circumstantial evidence to support its conclusion.             The Estate

responds that each of the factors cited by the court is either

factually   erroneous   or   irrelevant.     We    consider   each   of   the

evidentiary factors in turn.

     First, the Commissioner cites SFLP’s various disbursements of

funds to Strangi or his Estate.      The Estate responds that only two

of the payments –- those made in September and October 1994,

totaling $14,000 –- should be considered, because the remaining

payments were made after Strangi’s death, and thus “were not as a

consequence of anything Mr. Strangi did”.

     The Estate’s response misses the point.            Certainly, part of

the “possession or enjoyment” of one’s assets is the assurance that

they will be available to pay various debts and expenses upon one’s

                                    13
death.5   And that assurance is precisely what Strangi retained in

this case.   SFLP distributed over $100,000 from 1994 to 1996 to pay

for funeral expenses, estate administration expenses, specific

bequests and various personal debts that Strangi had incurred.

These repeated distributions provide strong circumstantial evidence

of   an   understanding   between   Strangi   and   his   children   that

“partnership” assets would be used to meet Strangi’s expenses.6

      Second, the Tax Court found “highly probative” Strangi’s

“continued physical possession of his residence after its transfer

to SFLP”.    The Estate responds by noting that SFLP charged Strangi

rent on the home.     As the Tax Court observed, although the rent

charge was recorded in SFLP’s books in 1994, the Estate made no

actual payment until 1997.      Even assuming that the belated rent

payment was not a post hoc attempt to recast Strangi’s use of the

      5
       See 26 C.F.R. § 20.2036-1 (“The ‘use, possession ... or
other enjoyment of the transferred property’ is considered as
having been retained by ... the decedent to the extent that the
use, possession ... or other enjoyment is to be applied toward the
discharge of a legal obligation of the decedent ... .”); see also
Ray   v.  United   States,   762  F.2d   1361,   1363  (9th   Cir.
1985)(considering use of transferred assets to pay transferor’s
funeral expenses as supportive of finding that transferor retained
possession or enjoyment under § 2036).
      6
       The Estate further contends that all of the above payments
were “pro rata partnership distributions”, meaning that Stranco
received cash disbursements in proportion to its 1% general partner
interest in SFLP. The Tax Court characterized these payments as
“de minimis”, insofar as they did not “in any substantial way
operate to curb decedent’s ability to benefit from SFLP property”.
Strangi II, T.C. Memo 2003-145. In short, although the importance
of the pro rata distributions to the “implied agreement” inquiry is
perhaps debatable, there is nothing clearly erroneous about the
decision to assign them minimal weight.

                                    14
house, such a deferral, in itself, provides a substantial economic

benefit.     As such, the Tax Court did not err in considering

Strangi’s continued occupancy of his home as evidence of an implied

agreement.

     Third, both the Commissioner and the Tax Court point to

Strangi’s lack of liquid assets after the transfer to SFLP as

evidence that some arrangement to meet his expenses must have been

made.   As noted supra, Strangi transferred over 98% of his wealth

to SFLP and afterward retained only $762 in truly liquid assets.

The Estate counters that Strangi had over $187,000 in “liquefiable”

securities, which could have been sold to meet expenses for the

remainder of Strangi’s life –- that is, for the twelve to twenty-

four months he was expected to live after August 1994.        Even this

limited assertion seems dubious, however, when, as the Tax Court

noted, Strangi averaged nearly $17,000 in monthly expenses over the

two months between the creation of SFLP and his death.      See Strangi

II, T.C. Memo 2003-145.

     In sum, upon creation of SFLP, Strangi retained assets barely

sufficient to meet his own living expenses for the low end of his

life expectancy –- that is, for about one year –- assuming he was

never   required   to    pay   rent,    estate   administration   costs,

outstanding personal debts, funeral expenses, or taxes.           At the

same time, Strangi began receiving substantial monthly payments out

of SFLP’s coffers.      Given these circumstances, we cannot say that

the Tax Court clearly erred in holding that Strangi and his

                                   15
children had some implicit understanding by which Strangi would

continue    to   use   his   assets    as    needed,     and    therefore    retain

“possession or enjoyment” within the meaning of § 2036(a)(1).7

                                        B

      The Estate next contends that, even if the assets transferred

to SFLP do fall within the ambit of § 2036(a)(1), they should

nonetheless be excluded from the taxable estate, based on the “bona

fide sale” exception contained in § 2036(a).               For the reasons set

forth below, we disagree.

      Section 2036(a) provides an exception for any transfer of

property that is a “bona fide sale for an adequate and full

consideration in money or money’s worth”.                The exception contains

two   discrete    requirements:       (1)    a   “bona   fide    sale”,     and   (2)

“adequate   and    full   consideration”.          See    Estate   of   Harper     v.

Commissioner, T.C. Memo 2002-121.            Both must be satisfied for the

exception to apply.

                                        1

      We turn briefly to the “adequate and full consideration”

requirement.      This requirement is met only where any reduction in

the estate’s value is “joined with a transfer that augments the

estate by a commensurate ... amount”.              Kimbell, 371 F.3d at 262.


      7
       Because we hold that the transferred assets were properly
included in the taxable estate under § 2036(a)(1), we do not reach
the Commissioner’s alternative contention that Strangi retained the
“right ... to designate the persons who shall possess or enjoy the
property”, thus triggering inclusion under § 2036(a)(2).

                                        16
Where assets are transferred into a partnership in exchange for a

proportional     interest   therein,   the   “adequate     and   full

consideration” requirement will generally be satisfied, so long as

the formalities of the partnership entity are respected.8         The

Commissioner concedes that such has been the case here.      As such,

the adequate and full consideration prong of the exception is

satisfied and the sole question before us is whether the transfer

was a “bona fide sale”.

                                  2

     Thus, we turn our attention to the bona fide sale requirement.

The term “bona fide”, taken literally, means “in good faith” or

“without fraud or deceit”.    See BLACK’S LAW DICTIONARY, 186 (8th ed.

2004). As we have previously observed, use of a “bona fide”

standard often requires the courts to assess both the subjective

intent of a party and the objective results of his actions.      See,



     8
         As we observed in Kimbell, 371 F.3d at 266:

            The proper focus therefore on whether a
            transfer to a partnership is for adequate and
            full consideration is: (1) whether the
            interest credited to each of the partners was
            proportionate to the fair market value of the
            assets each partner contributed to the
            partnership,    (2)    whether   the    assets
            contributed by each partner to the partnership
            were properly credited to the respective
            capital accounts of the partners, and (3)
            whether on termination or dissolution of the
            partnership the partners were entitled to
            distributions from the partnership in amounts
            equal to their respective capital accounts.

                                 17
e.g., United States v. Adams, 174 F.3d 571, 576-77 (5th Cir.

1999).

       As we noted in Wheeler v. United States, however, Congress in

1976 removed a provision from the Internal Revenue Code that

included within the taxable estate transfers “intended to take

effect in possession or enjoyment” after the decedent’s death. 116

F.3d 749, 765 (5th Cir. 1997).                We observed that Congress’s

apparent purpose was to “eliminate factbound determinations hinging

on   subjective      motive”.      Id.    (quoting   Estate    of   Elkins    v.

Commissioner, 797 F.2d 481, 486 (7th Cir. 1986)).              As such, since

Wheeler, we have held that whether a transfer of assets is a bona

fide sale under § 2036(a) is a purely objective inquiry.                     See

Kimbell, 371 F.3d at 263-64.

       We have yet to definitively state, however, precisely what

this       “objective”   inquiry   entails.     Relying   on   language   from

Wheeler, the Estate contends that the “objective” bona fide sale

inquiry requires only that the transfer be for adequate and full

consideration.9          The exception to § 2036(a), however, already

       9
       In support of its contention, the Estate cites Wheeler for
the proposition that “[t]he only possible grounds for challenging
the legitimacy of a transaction [under § 2036(a)] are whether the
transferor actually parted with the [transferred property] and the
transferee actually parted with the requisite adequate and full
consideration”. 116 F.3d at 764. Our holding in Wheeler, however,
was expressly limited to the narrow factual circumstances of an
intra-family sale of a remainder interest in real property. See
id. at 756. Although adequate consideration may suffice to show
the absence of fraud or deceit where a real property interest is,
in fact, transferred from one party to another, such is not the
case where, as here, the purported transfer arguably deprives the

                                         18
expressly   requires   that   transfers   be   for   “adequate   and   full

consideration”.     As such, the Estate’s interpretation of the

exception would render the term “bona fide” superfluous, and must

therefore be rejected.10

     We think that the proper approach was set forth in Kimbell, in

which we held that a sale is bona fide if, as an objective matter,

it serves a “substantial business [or] other non-tax” purpose. Id.

at 267. As noted supra, Congress has foreclosed the possibility of

determining the purpose of a given transaction based on findings as

to the subjective motive of the transferor.          Instead, the proper

inquiry is whether the transfer in question was objectively likely

to serve a substantial non-tax purpose.11      Thus, the finder of fact

is charged with making an objective determination as to what, if

any, non-tax business purposes the transfer was reasonably likely

to serve at its inception.    We review such a determination only for

clear error.      See Walker Intern. Holdings Ltd. v. Republic of

Congo, 395 F.3d 229, 233 (5th Cir. 2004).


transferor of literally nothing.
     10
       We recognize that the Estate’s proposed interpretation of
§ 2036(a) would yield a more uniform and predictable rule than the
one set forth in Kimbell and here. Although we acknowledge the
importance of predictability in the law governing estates and
estate planning, it cannot be had at the expense of the plain
language of the statute.
     11
         Accord Merryman v. Commissioner, 873 F.2d 879, 881 (5th
Cir. 1989) (“To determine whether economic substance is present,
courts view the objective realities of the transaction or, in other
words, whether what was actually done is what the parties to the
transaction purported to do.”).

                                   19
     The Estate proffered five discrete non-tax rationales for

Strangi’s transfer of assets to SFLP.                  They are: (1) deterring

potential tort litigation by Strangi’s former housekeeper; (2)

deterring a potential will contest by the Seymour children; (3)

persuading a corporate executor to decline to serve; (4) creating

a joint investment vehicle for the partners; and (5) permitting

centralized,     active    management       of   working         interests     owned   by

Strangi.      The    Tax   Court   rejected       each      of    the    rationales     as

factually implausible.        In reviewing for clear error, we ask only

whether the Tax Court’s findings are supported by evidence in the

record as a whole, not whether we would necessarily reach the same

conclusions.

     First, the Estate contends that Strangi transferred his assets

to SFLP partly out of concern that his former housekeeper, Stone,

might bring a tort claim against the Estate for injuries sustained

on the job.         The Tax Court, however, heard admissions by Gulig

that Strangi had paid all of the medical expenses stemming from

Stone’s injury and had continued to pay her salary during her

absence from work.

     Still, the Estate contends, had Stone sued, she might have

recovered    a     substantial     amount    for      her    pain       and   suffering.

Although    this    possibility     cannot       be   ruled      out     entirely,     the

evidence before the Tax Court suggests otherwise. Gulig testified,

for example, that Stone and Strangi were “very close” and admitted

that he had never inquired as to whether there was any evidence

                                        20
that Strangi actually caused Stone’s injury.              Further, there is no

evidence that Stone ever threatened to take any action.                 As such,

the Tax Court did not clearly err in finding that the transfer of

assets into SFLP did not operate to deter Stone from bringing a

tort claim against the Estate.

      Second, the Estate contends that SFLP served to deter a will

contest by the Seymour children.            The Tax Court concluded that

“[t]he Seymour claims were stale when the partnership was formed,

and   they   never   materialized”.        Strangi   I,    115   T.C.   at   485.

Further, although the Seymour children did retain counsel, Gulig

admitted that prior to the creation of SFLP neither they nor their

attorney ever contacted him in regard to Strangi’s will, and that

no claim was ever made against the Estate.                Although reasonable

minds   might   differ   on   this    point,   the   Tax     Court’s    factual

conclusion –- i.e., that the Seymour children either would not or

could not have mounted a successful challenge to the will –- is not

clearly erroneous.

      Third, the Estate argues that SFLP deterred TCB, the corporate

co-executor of Strangi’s will, from serving, thus saving the Estate

a substantial amount in executor’s fees.              The Estate presented

Gulig’s testimony regarding a meeting with TCB and TCB’s subsequent

declining to serve.      Nonetheless, the Tax Court was unpersuaded,

noting that it was “skeptical of the estate's claims of business

purposes related to executor and attorney's fees”.               See id.



                                      21
     The Estate concedes that “the reason for which the corporate

co-executor declined to serve[] is not reflected in the record”.

Thus, although a finder of fact might infer a causal relationship

between the existence of SFLP and TCB’s withdrawal, there is

nothing clearly erroneous in the Tax Court’s refusal to do so.

     Fourth, the Estate contends that SFLP functioned as a joint

investment vehicle for its partners.   The Tax Court rejected this

contention, noting that the contribution of the Strangi children,

which totaled $55,650, was de minimis and thus properly ignored for

purposes of the bona fide sale requirement.   The Tax Court further

concluded that, even if the contributions of the children were

properly considered, SFLP never made any investments or conducted

any active business following its formation.    See Strangi I, 115

T.C. at 486.

     The Estate responds that ignoring a shareholder’s contribution

as de minimis runs contrary to Kimbell, in which we noted that

there exists “no principle of partnership law that would require

the minority partner to own a minimum percentage interest in the

partnership for ... transfers to be bona fide”.   371 F.3d at 268.

It is certainly true that the de minimis contribution of a minority

partner is not, in itself, sufficient grounds for finding that a

transfer of assets to a partnership is not bona fide.     However,

where a partnership has made no actual investments, the existence

of minimal minority contributions may well be insufficient to

overcome an inference by the finder of fact that joint investment

                                22
was objectively unlikely. Such appears to have been the case here.

Thus, it was not clear error for the Tax Court to reject the

Estate’s “joint investment” rationale.

      Finally,    the    Estate   contends   that   SFLP   permitted   active

management of Strangi’s “working assets”. As a preliminary matter,

it is undisputed that the overwhelming majority of the assets

transferred to SFLP did not require active management.                   Some

seventy percent of the transfer, for example, consisted of various

brokerage accounts. As the Estate points out, however, this is not

unlike the situation in Kimbell, where we reversed summary judgment

for the Commissioner based in part on the transferor’s contribution

of $438,000 in working oil and gas properties, which comprised

approximately 11% of the overall transfer.             See id. at 267.

      The Estate asserts that working assets –- including real

property and interests in real estate partnerships –- comprise an

approximately equal proportion of the transfer in this case, as in

Kimbell.       Assuming this to be an accurate characterization of

Strangi’s contribution, this analogy misses the point. In Kimbell,

we reviewed cross motions for summary judgment on the “bona fide

sale” issue.      In reversing the district court, we noted that the

Commissioner “raised no issues of material fact in its motion for

summary judgment and challenged none of the taxpayer's facts”. Id.

at   268-69.     Among    the   unchallenged   facts    was   the   taxpayer’s

assertion that there had been significant active management of the

transferred oil and gas properties.          Id. at 267-68.

                                      23
      By contrast, this case comes to us after a full trial on the

merits. The Tax Court heard uncontested evidence that “[n]o active

business was conducted by SFLP following its formation”.              Strangi

I,   115   T.C.   at   486.   In   short,     although   Strangi     may   have

transferred a substantial percentage of assets that might have been

actively managed under SFLP, the Tax Court concluded, based on

substantial evidence, that no such management ever took place.

From this, the Tax Court fairly inferred that active management was

objectively unlikely as of the date of SFLP’s creation.              As such,

we cannot say that the Tax Court clearly erred in rejecting the

Estate’s “active management” rationale.

      In sum, we hold that the Tax Court did not clearly err in

finding    that   Strangi’s   transfer   of    assets    to   SFLP   lacked   a

substantial non-tax purpose.        Accordingly, the “bona fide sale”

exception to § 2036(a) is not triggered, and the transferred assets

are properly included within the taxable estate.                We therefore

affirm the estate tax deficiency assessed against the Estate.

                                     C

      The Estate raises one final matter for our consideration.               It

contends that, even if the Tax Court did not err in holding the

transferred assets includible under § 2036(a), it nonetheless

abused its discretion in denying the Estate leave to amend its

petition to include a computational offset, based on a time-barred

income tax refund, under the doctrine of equitable recoupment.                As



                                    24
such, the Estate requests that we remand the case to the Tax Court

with instructions that it offset the assessed estate tax deficiency

by $304,402 already paid in income taxes.

      The   doctrine   of   equitable    recoupment   applies    where   the

Commissioner brings a timely suit for payment of taxes owed and the

taxpayer seeks to offset that amount by seeking a refund of an

erroneously imposed tax, but the taxpayer’s claim is time-barred.

Equitable recoupment allows the taxpayer to raise the time barred

refund claim “in order to reduce or eliminate the money owed on the

[Commissioner’s] timely claim”. Estate of Branson v. Commissioner,

264 F.3d 904, 909 (9th Cir. 2001).

      The problem in this case, as the Tax Court points out, is that

the Estate has adopted two inconsistent positions with respect to

its   equitable   recoupment   argument.      To   sustain   a   claim   for

equitable recoupment, the taxpayer must show, inter alia, that the

refund sought is, in fact, time-barred. See Estate of Branson, 264

F.3d at 910 (citing Stone v. White, 301 U.S. 532, 538 (1937)).           The

Estate, however, currently has a separate action pending in the

Western District of Texas, in which it contends that the disputed

refund is not time-barred.

      Given this inconsistency, the Tax Court held that the Estate

failed to show that the refund was time-barred, and denied its

motion to amend.       On appeal, the Estate argues only that this

result is inequitable.      Unfortunately, in so doing, it neglects to



                                    25
address the controlling legal issue here –- i.e., whether the Tax

Court erred in concluding that the refund was not time-barred, and

thus not subject to equitable recoupment.    In sum, because the

Estate has failed to brief us on the underlying merits of the Tax

Court’s ruling, it has likewise failed to show that the Tax Court

abused its discretion in denying the motion to amend.

                               III

     For the foregoing reasons, the decision of the Tax Court is

                                                        AFFIRMED.




                               26
