Navigating the New Section 2704 Discount Valuation and Transfer Regulations: What Estate Planners Must Do Now

On Aug. 2, 2016, the IRS issued long-anticipated proposed regulations under Section 2704 of the Internal Revenue Code that would make broad and significant changes to valuation of interests in family-controlled entities for estate, gift and generation-skipping transfer tax purposes. The new rules are intended to apply to both operating and non-operating family-owned or family-controlled entities and would eliminate or curtail many valuation discounts as well as some techniques estate planners currently utilize in connection with transfers of interests in such entities. Specifically, the new rules target lapses of voting or liquidation rights and eliminate some valuation discounting opportunities in determining the fair market value of a transferred interest.

The public hearing on the proposed regulations is scheduled for December 1, 2016. Certain provisions of the proposed regulations will become effective with respect to transfers that occur on or after the date the final regulations are published, and others will apply to transfers occurring 30 or more days after such publication. In particular, the latter period will apply to transfers of interests that are subject to restrictions falling into a newly defined category of “disregarded restrictions.” This could well mean that much current discount planning will become obsolete after this year. Estate planning counsel should consider accelerating planned sales or gift transfers so that these are completed this year, and advising clients that were on the fence to plan proactively now.

Listen as our experienced panel provides a critical first look at the newly proposed regulations and offers practical guidance on what planners should be doing now to assist clients in utilizing soon-to-expire valuation opportunities.

1. Contents of proposed 2704 regulations
2. Asset structures that will be affected by valuation rule changes
3. Structuring new transfers in the interim
4. Evaluating existing structures for holding family assets
5. Impact on tax apportionment clauses, estate equalization clauses
6. Impact on buy-sell agreements and why they should be revisited for family controlled businesses

The panel will discuss these and other important issues pertaining to the newly-proposed Section 2704 regulations:

• What types of asset transfers are subject to the new regulations?
• How will the proposed change in the treatment of lapses of voting or liquidation rights impact future transfers of family-owned assets into family limited partnerships or trust vehicles?
• What is the impact of the changes to valuation discounts on transfer of closely-held businesses into estate planning vehicles?
• What must estate planning attorneys and advisers do with existing transfers and operating documents to minimize the tax impact to clients of the new regulations?

Learning Objectives

After completing this course, you will be able to:

• Identify the types of assets and transfers that will be subject to the new Section 2704 regulations limiting valuation discounts
• Determine provisions in existing transfer structures and operating documents that may create tax payment and reporting obligations
• Define what client transfers of non-controlling interests in family entities should be made immediately in light of the new regulations
• Recognize state provisions that may be overridden by the new regulations

• Field of Study: Accounting
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience with estate plan transfers of closely held business assets at mid-level within the organization, supervising other preparers/accountants. Specific knowledge and understanding of estate plan asset transfers, family-owned assets, limited partnerships and trust vehicles; familiarity with discount valuation and awareness of the basics of new IRC 2704.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).