The IRS issued proposed regulations under Code Section 2704 that would severely limit or eliminate the use of valuation discounts for family estate and gift tax planning. The proposed regulations would apply to transfers that occur after the regulations are finalized. The IRS will hold a public hearing on the proposed regulations on December 1, 2016. The regulations will not become final until December 31, 2016, at the earliest.
By way of background, in 1990 Congress enacted Section 2704 of the Internal Revenue Code. The goal of this Section was to limit discounts for family partnerships and family LLCs. However, States enacted laws that enabled taxpayers to continue to take advantage of discounts despite Section 2704.
The proposed regulations would severely limit or eliminate discounts for transfers of interests in family partnerships and family LLCs that are made within three years of the date of death. They would also eliminate discounts for transfers made to an individual who is not a full owner, and make it much more difficult for taxpayers to use State law to continue to take advantage of discounts.
Senate Republicans have joined House Republicans to introduce legislation to block the proposed regulations.
Mr. Hendel has been practicing wealth preservation planning for over thirty years.