Proposed Regulations Affecting Valuation Discounts - New Update Provides Sigh of Relief

In August of 2016, the Internal Revenue Service (the “IRS”) proposed regulations that, if made final, would have extensive consequences on estate planning for owners of family-controlled businesses. These regulations, under Internal Revenue Code (“IRC”) Section 2704, would have severely restricted or even eliminated the use of valuation discounts in regards to transfers of interests in family entities.

Valuation discounts are vital in estate planning by way of allowing business owners to transfer interests in their entities to their family members in a manner that saves estate, gift and generation-skipping transfer taxes. The regulations proposed in 2016 were met with immense negative feedback from the public fighting for the government to heavily revise or, more preferably, withdraw the proposed regulations altogether.

As of October 20, 2017, business owners may breathe a sigh of relief for now as the IRS has officially withdrawn the proposed IRC Sec. 2704 regulations in response to Executive Order 13789. Under this Executive Order, President Trump instructed the Secretary of the Treasury to review tax regulations proposed after January 1, 2016 that may result in undue financial burdens, add complexity to the Federal tax laws, or exceed the IRS’s scope of authority. The proposed regulations to IRC Sec. 2704 were flagged in response to this Executive Order.

After months of discussion and public outcry, the review imposed by Executive Order 13789 led the IRS to conclude that the proposed regulations would have been an impractical approach in dealing with valuation discounts. Whether the IRS will revisit this code section remains to be seen, but for now, the withdrawal of these proposed regulation changes has put many families at ease. For more information on the proposed regulations, contact us

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2021 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on
The Impact of Environmental, Social and Governance Factors on Business Valuation
Projections: The Dirty Little Secret of Business Valuation
Ohio Update on the Unemployment Benefits Exclusion for Taxpayers Who Filed Prior to the Enactment of the American Rescue Plan Act
LIFO Liquidation Relief for Automotive Dealers
Valuing a Business: Why Your Deli (Likely) Isn’t Worth $100 Million
M&A Activity on the Rise in 2021
Register to receive our weekly newsletter with our most recent columns and insights.
Have a question? Ask us!

We’d love to hear from you. Drop us a note, and we’ll respond to you as quickly as possible.

Ask us
contact us
Map of Pittsburgh Office

One PPG Place, Suite 1700
Pittsburgh, PA 15222

[email protected]
p:412.261.3644     f:412.261.4876

Map of Columbus Office

65 East State Street, Suite 2000
Columbus, OH 43215

[email protected]
p:614.621.4060     f:614.621.4062

Map of Washington Office
Washington, D.C.

1660 International Drive, Suite 600
McLean, VA 22102

[email protected]

This site uses cookies to ensure that we give you the best user experience. Cookies assist in navigation, analyzing traffic and in our marketing efforts as described in our Privacy Policy.