Proposed Valuation Rules Under Section 2704

Sep 26, 2016

Proposed regulations under section 2704 of the Internal Revenue Code, released on August 2, 2016 and published to the Federal Register on August 4, 2016, would make sweeping and very significant changes to the valuation of interests in many family-controlled entities for estate, gift, and generation-skipping transfer tax purposes. Code section 2704 provides special gift, estate and generation-skipping transfer tax valuation rules for valuing transfers of interests in corporations and partnerships subject to lapsing voting or liquidation rights and restrictions on liquidation. The proposed regualtions would significantly increase the burden of the death tax. Specifically, the rule will hinder the ability of businesses to apply proper valuation discounts for estate, gift, and generation skipping taxes.

Legilsations has been introduced in both the House & Senate to block the Treasury from finalizing the proposed rules. Sponsored by Congressman Davidson (R-OH), HR 6100,  and Congressman Rubio's (R-FL) S 3436, the legislation objects to the underlying premise of the proposed rules and prohibits Treasury from taking action to make them final. These bills go a step farther than HR 6042 which was introduced by Congressman Sensenbrenner (R-WI) that would nullify the proposed regulations.

We strongly incourage everyone to get involved. The official comment perios is open until November 2nd. The more the Treasury hears from the community banking community on this issues, the less likely they will be able to finalize these harmful rules as proposed.