From the Florida Cattlemen’s Association:
Last month, the Department of Treasury’s proposed regulations under Section 2704 to eliminate or greatly reduce the discounts for lack of control and lack of marketability for family related entities, and would effectively discourage families from continuing to operate, grow their family businesses and pass them on to future generations or others.
Valuation discounts are an important tool in estate planning. The two main discounts are for lack of control (also referred to as minority interest) and lack of marketability. In order to take advantage of these discounts, many families create family limited partnerships (FLPs) and limited liability companies (LLCs) to hold and transfer family assets for estate planning purposes. In some cases, discounts of 40% or more have been allowed for transfer tax purposes on gifts and bequests of interests in such FLPs and LLCs.
The IRS has consistently challenged the use of valuation discounts but has been mostly unsuccessful in its challenges. So, on August 2, 2016, the IRS issued proposed regulations which would significantly limit, or possibly eliminate, valuation discounts. The proposed regulations will not take effect until they are issued as final regulations (or soon thereafter), and a hearing on the proposed regulations and public comments to them is scheduled for December 1, 2016.
Most importantly, there may be a brief window of opportunity for families to take estate planning steps to take advantage of the valuation discounts prior to the imposition of new regulations.
We strongly encourage you to considering signing the FBETC letter, which is open to all family-owned businesses and corporations; business, industry and trade associations; state and local chambers, and allied organizations. The deadline for signatures is Monday, September 26, 2016 by 5:00pm EDT. To sign on, click here.
Please note that all signatories must make sure they are entering in their correct info as they would like it to appear on the letter (so double check spelling), and that every signatory must sign on to the letter themselves.
Deadline for signatures is Monday, September 26, 2016 by 5 p.m.