December 29, 2016
The window could soon be closing for individuals to take advantage of valuation discount planning, a change that likely would result in substantial increases to estate taxes beginning in early 2017.
In August, the U.S. Treasury announced it would seek changes to Section 2704 of the Internal Revenue Code. This change would prevent families with operating businesses and companies that hold passive investment assets from being able to discount the value of their business.
“Because of this narrow window of time, business owners should review their business planning strategy with their tax and legal advisors to determine if discounting would be a benefit to the overall family estate,” says Stephen Sherline, Market Leader for The Private Client Reserve of U.S. Bank in Los Angeles. “If the answer is yes, they should take advantage of the rules before the proposed changes go into effect.”
Otherwise, the hit could be substantial.
“We’ve seen examples where as much as 40 percent of this discount was lost,” Sherline cautions. “Time is a significant factor, so it's important to act quickly.”
Keep in mind, however, that with the upcoming administration change on Jan. 20, some experts think these regulations may not be implemented.