IRS Withdraws Valuation Discount Regulations

  • Contributors:
  • Eric Larson
Image of two women analyzing documents about valuation discount regulations and estate plan

The IRS issued proposed valuation discount regulations under Section 2704 in late 2016. It officially withdrew these regulations on Oct. 20, 2017.

The proposed regulations could’ve dramatically affected valuation discounts for intrafamily transfers in a variety of entities. It could’ve also created a significant amount of uncertainty in the estate planning field.

Under the proposal, the IRS would’ve treated certain lapses of liquidation rights as transfers occurring at death.

The regulations would’ve also changed how the value of transferred interest was determined in family-controlled entities and how restrictions and withdrawal would’ve impacted the value.

Then, this would’ve affected certain transferors of interests in corporations and partnerships.

Because the IRS withdrew the proposed regulations, Section 2704 will continue to treat a lapse of voting or liquidation rights as a transfer equal to the excess of the fair market value of all interests held by the transferor.


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