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A family partnership may be used to shift both the income tax burden and the appreciation of assets from parents to children or other family members. However, the benefit of income shifting to children under age 14 is limited, since unearned income in excess of $1,850 (as indexed for 2002) generally will be taxed at the parents' income tax rate. A parent may transfer a business interest to his children and retain control of the business through his general partnership interest.Upon transferring the interest, the parent may receive a discount for gift tax purposes if it is a minority interest or because of lack of marketability, and any appreciation on that interest should not be included in his or her estate, assuming a valid partnership has been established.
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