The IRS issued proposed regulations on August 2nd that would change the way that closely held businesses are valued for estate and gift tax purposes. Under the current regulations, the value of closely held business interests can be discounted for minority holdings and lack of marketability.

The proposed regulations define a new and expanded class of “disregarded restrictions.” If finalized in their current form (and upheld by the courts), they will have a very significant and limiting effect on the benefits of transfers of interests in certain entities to family members for estate and gift tax purposes. These are likely be finalized in early 2017, however, legislation has recently been introduced that could potentially overturn these proposed regulations.

To prepare, business owners with estates approaching the $5.45 million limit need to look at the impact these new regulations would have on their estate plan, and consider acting before these regulations are finalized.

We hope this information has been helpful to you. If you think this change could affect you or you have any further questions, please contact your Whalen & Company representative.

Source: http://bit.ly/2d3atpt

• Category: Client Alerts