In 20Y1, Ms. Graves transferred appreciated property to KL Partnership in exchange for an ownership interest in the partnership. She deliberated waited until 20Y3 before taking cash out of the partnership. Ms. Graves may have been trying to prevent the IRS from applying the:

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The step transaction doctrine allows the IRS to collapse a series of formally separate steps into a single transaction if they are in substance integrated, interdependent, and focused on a particular result. By waiting to take cash out, Ms. Graves may have been trying to avoid the appearance of a prearranged plan that could be collapsed into a single taxable event.