Proposed Treasury Regulations Regarding Valuation Discounts for Transfers of Family-Controlled Entities Would Apply More Broadly than Anticipated

September 08, 2016

After years of anticipation, the U.S. IRS recently issued Proposed Treasury Regulations that would, if enacted in their current form, substantially eliminate most valuation discounts for family-controlled entities and result in higher gift and estate taxes on transfers of family-controlled entities (even most entities with some non-family owners). The Proposed Regulations are more widely applicable than many estate planning professionals anticipated. Importantly, the Proposed Regulations apply to both operating and non-operating family-controlled entities (such as family limited partnerships funded with marketable securities) and contain a look back period for certain transfers completed within 3 years of death. There is a window of opportunity until at least December 1, 2016 for planning for individuals who wish to make gifts or other transfers of interests in family-controlled entities utilizing valuation discounts before the proposed regulations are finalized. If you would like to consider planning opportunities before the Proposed Regulations become effective, you should consult one of Dechert’s Private Client attorneys as soon as possible.

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