On August 4th of this year, the Internal Revenue Service issued proposed regulations under Internal Revenue Code Section 2704 designed to limit consideration of marketability and control factors in the valuation of family-held business interests in estate, gift and generation-skipping tax valuations. The new regulations are expected to take effect in the first half of 2017, perhaps as early as the first quarter.
For many years, Porter, White & Company has provided valuations in connection with estate, gift and generation-skipping transfer taxes. We share the view of most commentators that the proposed regulations could materially increase taxes due upon some generational transfers of family-owned business interests. We believe that individuals considering generational transfers should consult their estate planning and tax advisors about completing such transfers in advance of the effective date of the proposed amendments.
To assist in the financial and tax analysis of potential transfers, we are prepared to provide calculations of the potential impact of the proposed regulations on marketability and control discounts under different scenarios, including (i) under present regulations and (ii) under the regulations as proposed to be amended, both as interpreted by the client’s tax advisors.