IRS Indicates that potential 2704(b) regulation changes may not be as severe as hyped

This is the report from the S Corporation Association of America 
 
"Guidance on restrictions on estate valuation discounts for certain corporations and partnerships is expected very soon and won’t be based on previous administration proposals, Leslie Finlow, an IRS senior technician reviewer, said today.
 
Tax code Section 2704(b) gives the Treasury Department the power to issue new regulations disregarding additional restrictions on liquidations of interests if the restrictions reduce the value of the transferred interest but not the value of the interest to the transferee.
 
However, Finlow told certified public accountants at the American Institute of CPAs Fall Tax Division Meeting, that the Internal Revenue Service isn’t looking to a 2013 Obama administration proposal that called for further restrictions on valuations of family business interests. Instead, she said the guidance will focus on “the statute as it looks now.
 
On this blog on August 24, 2015 I indicated that although much had been speculated as to what might take place, we need to hold off on speculation based on off handed comments by a Treasury official in a public forum.  A lot can happen.  This is still true.
 
I stated at that time that nothing may happen, proposed regulations may be presented, temporary regulations may be proposed, or final regulations may be issued.  Until we know what the U.S. Treasury presents we need to wait and see.  Specifically I stated,
 
“Given inference and innuendo with respect to what the U.S. Treasury Department may or may not propose, those practitioners consulting in the area of valuation, tax planning, tax advice and conflict resolution with the IRS need to wait and see what if anything may be forthcoming from the U.S. Treasury Department, and where there is an interest provide feedback to various elected officials and to the U.S. Treasury Department with respect to any concerns raised by any proposed regulations. It has been my experience that our democratic process has a direct impact on proposed regulations from the U.S. Treasury Department.
 
The information presented by the off handed comments indicated the IRS would have presented their recommendations by September.  Today is December 2, 2015.   I think this proves the point.
 
I also want to note that Richard Dees wrote a 29 page letter to the IRS on this issue.  That may or may not have had any impact on the U.S. Treasury Department’s decision, but it certainly did not hurt.  His commentary articulated concerns considering the legal history on the matter and the court’s determination of fair market value.  He shared the same news on LinkedIn.  For those of you on LinkedIn you can see his post here.
 
At any rate, we need to wait and see what if anything will take place.  To be continued…

About the author

Mike Gregory is a professional speaker, an author, and a mediator. You may contact Mike directly at mg@mikegreg.com and at (651) 633-5311. Mike has written 12 books (and co-authored two others) including his latest book, The Collaboration Effect: Overcoming Your Conflicts, and The Servant Manager, Business Valuations and the IRS, and Peaceful Resolutions that you may find helpful. [Michael Gregory, ASA, CVA, NSA, MBA, Qualified Mediator with the Minnesota Supreme Court]