Type: Law Bulletins
Date: 08/04/2016

Now is the Time to Do Family Business Succession Planning – Proposed Regulations Could Affect Valuations on Gifts

The IRS and the Treasury Department have released proposed regulations to Internal Revenue Code Section 2704 that would change the law on how interests in businesses are valued for estate and gift tax purposes. Under current law, downward adjustments in value, such as minority discounts, are typically applied by appraisers when owners transfer company interests to their children and other family members. These discounts reduce the amount of estate or gift tax exemption an owner uses to make the transfer. Under the proposed regulations, these kinds of discounts would be limited when the transfer is made to children, grandchildren and other family members.

The proposed regulations are not expected to become effective until early in 2017, and it is likely that they will be challenged. Nevertheless, family business owners should move forward with succession planning this year, while the existing law on minority and other discounts is in effect. Business owners should contact their estate planner or business attorney to determine what steps should be taken in 2016.

To read the proposed regulations, click here

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