Update on Estate and Gift Tax Changes Coming in 2016

Proposed rule changes would limit the practice of discounting the value of stakes in family businesses for estate and gift tax purposes—an update regarding IRS timeline.

The U.S. Treasury Department and the IRS are planning to introduce new regulations aimed at estate and gift transfers of closely held family businesses. The new rules would limit the practice of discounting minority stakes in closely held family owned businesses because of restrictions on an owner’s ability to sell their piece of the business.

The Wall Street Journal on August 19, 2016 reported that the IRS is accepting comments on the new proposals, and a hearing is scheduled for December 1, 2016, and some experts think the current administration will push to finish the proposed changes before a new president takes office.

A brief window of opportunity exists as the proposed changes will likely not take effect until 30 days after the rules are made final. Implementation of wealth transfers can easily take 2 to 4 months to complete, depending on the complexity of the entities and estates involved. Therefore, we urge you to talk with your estate, legal and tax advisors now to evaluate how the proposed regulations could impact your business succession and wealth transfer plans. Those who can take advantage of current rules will need to act immediately.

Exit Strategies performs valuations of family-owned operating businesses and holding companies for estate planning, gifting and other purposes. We value fractional interests using appropriate discounts.  If you have any business valuation questions or have a current need you can reach Louis Cionci at 707-781-8582.