Proposed Rules by the IRS Would Increase Estate and Gift Taxes

On August 4, the Internal Revenue Service (IRS) issued proposed rules concerning the valuation of interests in family-owned corporations and partnerships for estate and gift tax purposes. If these proposed rules are adopted in their current form, they will have a significant (and negative) impact on estate planning for many. Specifically, valuation discounts for certain intra-family transfers (including bequests, gifts and sales) of interests in corporations and partnerships, which have for many years been widely available, will be severely limited going forward.

Fortunately, the proposed rules will generally only apply to transfers occurring on or after the date the final rules are published by the IRS, and that probably won’t happen until the spring of 2017 (and perhaps even later). Thus, the current rules will continue to apply until that time and many people will likely use this window of opportunity to complete transfers of interests in family-owned entities.

It is possible that the final rules will be less draconian than the proposed rules, but significant changes to the proposed rules are not expected. So, if you want to take advantage of the current estate tax and gift tax valuation rules, now is the time to act. 

Authored by Mark Watson. For any questions on this matter, please contact us.