Valtrend - Butler Business Valuation

Potential Changes in Estate Tax Rules: Watch Out!

The proposed changes would allow the IRS to ignore many minority interest discounts and, therefore, collect much more in estate and gift taxes.テつ Many wealthy families place assets such as real estate and/or marketable securities into a holding company and then gift minority interests in the wrapper, or holding company.テつ Thus, they may own assets worth $10M inテつpublicly-traded stocks,テつfor example,テつbut pass only $6M inテつvalue toテつtheir heirs (due to the discounts), lowering the tax bill by $1.6M.テつ At some point later on, the heirs may dissolve the holding company and have immediate access to the assets – effectively bypassing any holding restrictions.テつ The IRS, obviously, does not like this.

The odd part of the proposed changes also eliminates these discounts – for lack of control and lack of marketability in operating entities – companies where lack of control and lack of marketability are legitimately consideredテつin any transaction.

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