Proposed IRC 2704 Regulations Update
In two previous articles, I discussed the Proposed IRC 2704 Regulations. These regulations would dramatically impact estate and gift tax values of transferred assets through the virtual elimination of valuation discounts and other provisions. There was a lengthy comment period and almost 10,000 comments were received and nearly 40 speakers representing individual taxpayers, family businesses, attorneys, wealth planners, valuation professionals, and valuation organizations were heard during a public hearing. The question of President Trump’s potential impact on these regulations was raised. No one knew what to expect. Since my last article, we have received more clarity on what the President might intend, but no definitive interpretation yet.
Executive Order 13789
On April 17, 2017, President Trump issued Executive Order 13789 which was designed to reduce tax regulatory burdens. In the Executive Order, the President called on the Secretary of the Treasury to review all significant tax regulations issued by the Department of Treasury on or after January 1, 2016, and identify all such regulations that, among other things, “impose an undue financial burden on United States taxpayers.” In response to the Executive Order, the Secretary of the Treasury posted Notice 2017-38. In the Notice, the Secretary identified the Section 2704 regulations as one of eight regulations meeting the President’s criteria. The Notice called for additional public comments on whether the regulations should be rescinded or modified, and if the later, how they should be modified. Comments were due August 7, 2017.
As of the date of this article, there are now almost 29,000 comments on the IRS Docket page for the original Proposed IRC 2704 Regulations. Many of the comments are calling for a complete repeal of the proposed regulation. The Department of Treasury and the IRS must submit a final report by September 18, 2017, recommending their proposed changes for the eight regulations identified in the Notice.
Where does this leave us this time? I think it is still the case where no one is entirely sure. However, I do believe that the President’s Executive Order, the subsequent identification of the Proposed IRC 2704 Regulations by the Secretary as “posing an undue financial burden” on taxpayers, and the overwhelming comments against the Proposed Regulations can’t be ignored by the IRS. Time will continue to shed more light on the situation. I encourage you and your estate planning professional to consider the potential impact of the Proposed Regulations on your estate plan.
Should you have questions regarding the proposed regulations and their potential impact it may have on a business valuation, contact me, T. Eric Blocher CPA, ASA, CVA, at Eblocher@macpas.com.
