A Win for Family Businesses

by: Charles Friedman, Director

 

In 2016 it looked like a new proposed regulation might greatly limit a popular estate planning technique – leading to a big increase in the estate taxes of family business owners. Thankfully, late last month the IRS formally withdrew the proposal, allowing estate planners and their clients to breathe a huge sigh of relief.

Here’s a timeline of events: Back in August 2016 the IRS issued Proposed Regulation under IRC Sec 2704 that placed harsh restrictions on the ability to take discounts when performing transactions used in certain forms of estate planning. While the proposed regulation was supposed to specifically target family limited partnerships, the broad language of the proposed regulation created ambiguity in how far reaching it actually was. The restrictions imposed by the 2704 proposed regulations would have greatly limited or eliminated discounts for minority interests and lack of control in certain situations. This would have created a significant increase in the estate taxes of family business owners

On October 20, 2017, The IRS formerly withdrew the proposed regulations under Section 2704. This withdrawal removed the threat from using an essential tool used in many estate plans, and provides family business owners with great relief regarding their estate tax burden.

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