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IRS Valuation Discounts
At the American Bar Association meeting in May 2015, Cathy Hughes, Estate and Gift Tax Attorney of the US Department of Treasury’s Office of Tax Policy, commented that proposed amendments to Section 2704 (the IRS code that deals with valuation discounts) could be out by mid-September 2015. While the IRS has yet to publish these amendments, they could be aimed at reducing and/or eliminating valuation discounts for lack of control and lack of marketability currently available to taxpayers gifting interests in family limited partnerships, closely-held companies, and other wealth transfer vehicles.
The IRS has tried for many years to limit these discounts through the Tax Court but has not won many victories and has been forced to attempt to go the legislative route to limit discounts. President Obama’s 2013 budget (see page 79) included a proposal to restrict or eliminate valuation discounts on transfers of interests in family-controlled entities. The IRS has not yet followed up on its plans to limit these discounts, creating uncertainty in the Estate Planning community.
Given the uncertainty around the future availability of valuation discounts, anyone with a potentially taxable estate should consult an estate planning attorney before the window passes. According to IRS research, the larger the estate, the more likely the presence of a FLP.
Link to relevant article:
http://www.advfn.com/news_IRS-Takes-Aim-at-an-Estate-Planning-Strategy_67476977.html
Mr. Conroy has more than 20 years of consulting and business valuation experience, concentrating on complex estate and gift valuation matters. He provides business valuation and financial consulting services to companies in a broad range of industries. Working with domestic and international clients, Mr. Conroy has performed thousands of business appraisals involving gift and estate tax, financial reporting, mergers, and acquisitions (valuations for buyers/sellers, fairness, and solvency opinions), litigation support, expert testimony, and other company requirements (including stock options and ESOPs). Mr. Conroy previously worked with the national valuation firm CBIZ Valuation Group, LLC here he was a senior manager. Prior to that, he taught chemistry and physics to high school and college students at Xavier College in Ba, Fiji, for two years as a U.S. Peace Corps volunteer.