What is a viable option for transferring an appreciated asset?

Transferring an appreciated asset into a family limited partnership (FLP) is a viable option because it provides several tax advantages and allows for more control over the asset. By transferring the appreciated asset into an FLP, the owner can potentially reduce their taxable estate and manage how the asset is distributed among family members. The partnership structure allows for interests in the asset to be gifted or sold among family members, which can further help in estate planning.

Using the asset as collateral for a loan does not actually transfer ownership of the asset, but rather uses its value to secure financing. This option does not take advantage of the potential tax benefits associated with transferring the appreciated asset in the form of an FLP.

Selling the asset in the open market would generate capital gains tax on the appreciated value, reducing the overall benefit gained from the asset's appreciation. This approach does not provide the same strategic benefits in terms of estate planning as an FLP.

Giving the appreciated asset as a personal loan does not change the asset's ownership and could also trigger tax consequences based on the interest income or forgiveness of the loan if it is not repaid.

Therefore, utilizing a family limited partnership offers a strategic way to transfer an appreciated asset while also optimizing tax outcomes and control over the