From the Desk of Lauran L. Stevenson
Proposed 2704 Regulations and the Trump Tax Plan
On December 1, 2016, the IRS held a much-anticipated hearing on the 2704 proposed regulations. At the hearing, numerous experts commented on potential problems and other valuation issues that would result if the 2704 proposed regulations were finalized in its current form. Also at the hearing, the Treasury Department representative confirmed they did not intend to include a “deemed put right” in the 2704 proposed regulations that would eliminate the use of all discounts when valuing transfers of business interests, and that the Treasury Department planned to clarify this when the regulations were finalized. Therefore, while it is likely that the proposed 2704 regulations (if finalized) will still impact how family business interests are valued for gift and estate tax purposes, the impact on such valuations should not be as significant as originally feared.
The future of the proposed 2704 regulations is tied to two things—what happens to the rules themselves and what happens to the estate tax. Kevin Brady (R-Texas) of the House Ways and Means Committee Chairman said in a Nov. 21 interview with CNBC that the new Treasury secretary could stop the rules from moving forward on “Day One.” And President-elect Trump made repealing the estate tax—which would essentially make the rules unnecessary—one of his core campaign promises. It appears that 2017 is going to be a very interesting year for the estate planning community.