The Window May Be Closing on Valuation Discounts

If selling or gifting an interest in family-owned businesses or entities is part of your long-term estate/tax plan, the window may be closing on the use of valuation discounts as part of that strategy.

Today, when gifting minority interests in family businesses or entities, using valuation discounts for lack of control and lack of marketability is a common estate and tax planning strategy. It enables families to leverage the gift or sale of an asset such as a family business by reducing the value of the interest transferred. Such discounts can lead to significant gift and estate tax savings because they reduce the value of the assets recognized for gift tax calculations. In addition, the future appreciation of the interest transferred is removed from the grantor’s estate.

The Treasury Department has recently stated that it intends to release new regulations aimed at reducing or eliminating the use of such valuation discounts. The new regulations are likely to disallow the practice of taking into account discounts for marketability and control when valuing the interest being gifted or sold if the recipient or beneficiary of the transferred interest is a family member.

If your long-term plan calls for gifting or selling a family-owned business or entity, or you are considering making such a transfer in the near future, we encourage you to contact us before the Treasury Department issues its new regulations.


About The Author(s)

Marcus is an associate at Monroe Moxness Berg PA, practicing in the firm’s Estate Planning and Business Law practice groups.