Estate tax rule changes: Will proposed new rules take effect?

A repeal of the federal estate tax may or may not happen when the Trump administration takes office. A lot will depend on the dynamics of the new, Republican-controlled Congress.

In the meantime, however, new proposed rules from the Treasury Department and the IRS on the taxation of interests in family-owned businesses are generating significant concern among small business owners.

In this post, we will use a Q & A format to update you on those concerns.

What prompted the proposal for new rules?

In August 2016, the IRS proposed new rules on how to valuation of ownership interests in businesses (corporations or partnerships) for estate and gift tax purposes. The rules concern taxes known as GST, for estate, gift and generation-skipping transfer taxes.

The proposed rules are supposed to prevent transferors of certain business ownership interests from undervaluing the transferred interests. In other words, Treasury said it was proposing the new rules to close a tax loophole.

What types of comments has the IRS received on the proposed rules?

Critics of the proposed rules say they go too far in discouraging discounted valuations, which are a legitimate component of business succession planning.

It would be one thing, critics contend, if the new rules applied only to family limited partnerships that own securities. Such partnerships do have a real temptation to undervalue interests that are being transferred. Instead, however, the IRS also extended the proposed rule to operating businesses.

The number of comments already received on the proposal is approaching 10,000. In addition, a public hearing on the proposed rules drew the largest audience ever for a Treasury Department hearing.

What is the status of the proposed rules given the upcoming change in presidential administration?

Uncertainty abounds. Given the high number of comments, it's unlikely that the final rules will be in place by the end of the year. And then, less than three weeks after that, the new administration takes office.





No Comments

Leave a comment
Comment Information
Email Our Team

Contact Us to Get Started Today

Located in the Washington, D.C area, we serve clients in the District of Columbia, Maryland and Northern Virginia, as well as across the country and overseas. For a free initial consultation, call 202-381-1261 or complete our brief online form.

Bold labels are required.

Contact Information

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.


Privacy Policy

Six Convenient Office Locations in and around the DC Metropolitan Area

Washington, D.C.
1050 Connecticut Ave NW #500
Washington, D.C. 20036

Phone: 202-618-1873
Fax: 888-235-8405
Washington Law Office Map

Columbia Office
10440 Little Patuxent Parkway, Suite 300
Columbia, MD 21044

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Columbia Law Office Map

Annapolis Office
839 Bestgate Road
Suite 400
Annapolis, MD 21401

Phone: 202-618-1873
Phone: 410-497-5947
Fax: 888-235-8405
Annapolis Law Office Map

Fairfax Office
8280 Willow Oaks Corporate Drive
Suite 600
Fairfax, VA 22031

Phone: 202-618-1873
Phone: 703-988-4817
Fax: 888-235-8405
Fairfax Law Office Map

Rockville Office
199 E. Montgomery Avenue
Suite 100
Rockville, MD 20850

Phone: 202-618-1873
Phone: 240-599-5009
Fax: 888-235-8405
Rockville Law Office Map

Baltimore Office
400 East Pratt Street
8th Floor
Baltimore, MD 21202

Phone: 202-618-1873
Phone: 443-743-3381
Fax: 888-235-8405
Baltimore Law Office Map