Newly proposed IRS regulations meant to curb common estate and gift tax planning tactics is being met with a firestorm of resistance from financial advisers and estate planners across the country. The proposed regulations (REG-163113-02) place limitations on the use of current valuation discounts that reduce the overall value of assets in family-owned businesses, thus lowering a decedent’s estate and gift tax liability at the time of death. The IRS hope to achieve this end by disregarding restrictions that enabled taxpayers to use these discounts in the past.
Wealth Preservation In Closely Held Businesses
Currently, interests in closely held businesses are not taxed the same as other property interests due to their illiquid nature. Many tax and estate planners put a family’s assets in a closely held business to reduce their estate and gift tax liability. While this is a boon for many families seeking to preserve their wealth, others argue that what started out as a helpful tax break for legitimate family businesses is being abused and exploited by those who have no legitimate use of it.