Family limited partnerships have become a popular estate planning vehicle in recent years. Many clients enjoy the convenience of holding family property in one central entity and like the idea of obtaining valuation discounts for gifts of minority interests in a partnership. The IRS continues to question the validity of family limited partnerships from an estate and gift tax perspective, but practitioners also need to be aware of the income tax implications of creating and administering a family limited partnership. This article discusses one of these implications: the income tax treatment of contributions of appreciated property to a partnership (or to any other entity considered a partnership for federal income tax purposes). The so-called investment company rules govern these contributions.