Proposed Regulations Would Significantly Impact Valuation Discounts for Estate Planning and Wealth Transfers

August 9, 2016

The IRS recently issued proposed regulations, which if finalized would negate the availability of certain discounts when valuing interests in closely-held family business and investment entities for estate planning and wealth transfer purposes.

Despite a government official claiming to expect imminent release last year, some had questioned whether the regulations would ever be issued as they were on the IRS drawing board for over a decade.

Over the years, some estate planners have been using hefty discounts in valuing family businesses, despite frequent challenges from the IRS in court.

Although a careful review of the more than 50 pages of proposed regulations will be needed to assess the impact; it appears that the regulations are broadly drafted to substantially reduce or eliminate certain discounts with regard to a broad swath of interests in closely-held family entities, including such entities that own family businesses. The scope of the regulations is expected to cause taxpayers and their representatives to push back, as indicated in this article

According to the Treasury, final regulations won’t become effective until after a 90-day public comment period and hearings scheduled for this December.

If you have any wealth transfer transaction in mind, the time to do it is now, in order to take advantage of the current discounts.

For more information or answers to your questions, please contact Aronson’s Richard Lee at 301.231.6200 ext. 6268 or Emily Nathlich at 301.231.6200 ext. 2646.