New regulations have been proposed by the IRS which would eliminate, or severely restrict, one of the primary tools estate planners have used to transfer family businesses and assets for estate tax purposes.
The IRS is planning to eliminate or reduce valuation discounts that have been used in valuing ownership interests and transfers of interests in family-controlled entities including corporations, partnerships and limited liability companies.
Estate planners have used restrictions on liquidation and withdrawal to reduce the value of an interest in a family-controlled entity in a transfer. These rules would eliminate these discounts for estate and gift tax valuation purposes.
If you want to transfer a family business, you would be wise to act before the end of 2016.