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Discount Valuations May Be Eliminated for Family Wealth Transfers


8/10/15

Synopsis

In early fall, the IRS is expected to release proposed regulations that will eliminate, if not drastically restrict, the use of valuation discounts when transferring interests in family entities to family members. Time is running out to take full advantage of this tax saving mechanism before it possibly expires in mid-September.

Issue

At a recent American Bar Association (ABA) Tax Section meeting, Cathy Hughes, an official from the Treasury’s Office of Tax Policy, commented on several proposed statutory regulations and upcoming projects. She specifically mentioned that new proposed regulations could significantly reduce or disallow valuation discounts used to determine the value of closely held entities.

Without valuation discounts, the value of an estate and gifts would increase, resulting in higher taxes on the transfer of these interests to family members. These changes would have a significant impact on estate planning strategies that utilize valuation discounts in family owned entities.

What Does CohnReznick Think?

The IRS has previously tried to eliminate discounts in family transactions without success. The proposed regulations could deal a death blow to discounting. Our clients would be well advised to act soon given the potential loss of this tax savings benefit.

Contact

For more information, please contact Ira Herman, Partner, at ira.herman@cohnreznick.com or at 973-618-6245, or Morris Pinkowitz, Partner, at morris.pinkowitz@cohnreznick.com or at 732-380-8622, or Jay Scheidlinger, Senior Manager, at jay.scheidlinger@cohnreznick.com or at 646-254-7445.


Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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