In late August, the United States Treasury Department issued proposed regulations to § 2704 of the Internal Revenue Code which provides rules for valuing business interests transferred to family members. The proposed changes triggered an outcry in the media, and many advisors have urged taxpayers to take steps to make large transfers before year-end. In more recent days, Catherine V. Hughes, head of the Office of Tax Policy of the Department of the Treasury, has acknowledged publicly that the proposed regulations need improvement and that her office will be working to clarify the regulations.
Comments have been filed by numerous groups, including The American College of Trust and Estate Counsel (ACTEC), pointing >out ambiguities and requesting examples of application of the new rules. While each individual’s situation will vary based on facts and
circumstances, we can share with you a few general recommendations.
Making a Transfer
If you have been considering making a transfer of your business to family members and believe that it makes sense to do so, then you may wish to consider the advisability of making such transfer before final regulations are completed and become effective.
Considering a Transfer
Do not panic and feel forced to make a quick decision. Hughes has stated that the treasury will move cautiously and prudently, and there is no possibility that the regulations will be finalized prior to the 2017 presidential inauguration. We hope this is true, but we cannot guarantee it. Comments filed by ACTEC request that the treasury make the final regulations effective 30 days after publication to avoid uncertainty and confusion in trying to comply with the new rules.
If you would like to discuss your individual situation, please contact Cynda C. Ottaway or any member of our Private Wealth & Closely-Held Business Practice Group for guidance.