Proposed Tax Regulations Affect Family-Controlled Entities

Long-awaited proposed regulations under section 2704 of the Internal Revenue Code have been released.

They represent significant changes to the valuation of interests in many family-controlled entities for estate, gift, and generation-skipping transfer tax purposes.

Tax professionals say that if the final regulations are similar to the proposed regulations, taxpayers will have lost a significant estate planning technique, and the tax cost of transferring interests in family-owned entities will increase.

The proposed regulations are published in the Federal Register. Observers expect a lively comment period to precede a public hearing on December 1.

In an analysis from McGuire Woods LLP, professionals suggested clients considering transferring interests in family-controlled entities that are not controlling interests and do not have liquidation rights should consider making the transfers as soon as possible.