IRS Withdraws Proposed Regulations Under Section 2704

In August 2016, the IRS issued proposed regulations to Internal Revenue Code Section 2704 which were designed to eliminate certain discounts that were currently used and recognized under the law when valuing transfers in family owned or closely held businesses.

On October 17, 2017, the Internal Revenue Service filed the formal withdrawal of the proposed regulations. If the regulations had been finalized, the effect would have been to substantially reduce or eliminate minority and marketability discounts when determining the gift or estate tax value of interests in family owned entities. This is a taxpayer victory and a green light to proceed for those wishing to make gifts of family limited partnership interests or LLC interests after October 17, 2017.