VALUATION DISCOUNTS: GOING, GOING, GONE?
By: David P. Shaffer, Esq.
LIMITED TIME ONLY! We have all seen
advertisements such as these in the local supermarket or online. We are not quite as accustomed to seeing this
concept apply to U.S. Treasury regulations.
August 4, 2016, the U.S. Treasury Department issued proposed regulations that,
if finalized, will greatly limit certain estate planning strategies for family
business owners. For many years, owners
of family businesses have transferred business interests to the next
generation, usually in a gradual and deliberate manner. The dual purpose of these transfers is to introduce
their sons and daughters to the benefits and burdens of ownership, while
simultaneously accomplishing favorable estate and gift tax treatment. The tax efficiency stems from the ability to
take discounts on the values being transferred due to lack of marketability,
lack of control and/or minority discounts on the shares or units transferred.
new regulations will not prohibit such transfers; however, they will greatly
reduce the tax appeal for wealth transfer purposes by severely limiting the use
of valuation discounts. The proposed
regulations are not yet finalized, however, they will become effective once
that occurs. We are in the midst of a 90
day period during which the Treasury Department is soliciting comments on the
proposed regulations. A public hearing
will follow on December 1, 2016. At that
point, Treasury Department officials will review the comments and thereafter
issue final regulations. Most expect
this to occur by year-end.
the uncertainty of when these regulations will become finalized, it is critical
to act now. In other words, if you are
considering a gift or transfer of certain business interests in your LLC,
partnership or corporation, you should contact your Woods Oviatt Gilman LLP
attorney for assistance as soon as possible.
David P. Shaffer, Esq. is a Partner in the firm’s Family Wealth and
Estate Planning Department. He can be
reached at 585-987-2878 or Dshaffer@woodsoviatt.com