Aug 29, 2016
The proposed Internal Revenue Code Section 2704 regulations (the “regs”) prevent
taxpayers from considering a range of restrictions that could otherwise reduce the
value of an interest in an entity for transfer tax purposes. These restrictions include
those denominated “applicable restrictions” that had been in prior law. The regs
make these applicable restrictions much tougher and add a new category of
restrictions referred to as “disregarded restrictions.” The regs throw taxpayers a
bone, a rather small one, in terms of permitting at least one type of restriction on
value to be respected. This leniency permits consideration of restrictions a lender or
other financial partner may place on the entity or transaction. If the restriction
applies, then the valuation of an interest in a family entity might qualify for a
valuation discount, for example, for lack of control.
Read his commentary here.
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