In Kerr v. Commissioner, the Tax Court held that, for purposes of determining the gift tax owed, a lack of liquidity discount would be allowed in calculating the value of transferred limited partnership interests. The court considered whether the interests transferred could be characterized as assignee interests rather than partnership interests under either state law or Treasury regulations, and, if they were considered partnership interests, whether the restrictions on their liquidation were excepted from the definition of “applicable restrictions,” for which discounts are not allowed, under section 2704(b) of the Code. The court found that the transferred interests were limited partnership interests, but that the restrictions on their liquidation were not within the meaning of “applicable restrictions” under section 2704(b)(3)(B) because the partnership’s restrictions on liquidation were no more restrictive than the state law on liquidation that would apply in the absence of the partnership agreement. Therefore, the restrictions on liquidation could be taken into account in determining the value of the transferred interests.Part I of this Note discusses valuation discounts and the statutory framework of section 2704(b). Part II sets forth the facts of Kerr v. Commissioner. Part III discusses each of the taxpayers’ alternative arguments. Part IV discusses the Tax Court’s decision. Finally, Part V analyzes the court’s opinion and discusses the implications of the decision for estate planners.