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Long-Awaited Proposed Regulations for Section 2704 Issued!

Published: August 2nd, 2016

By: Dana M. Apfelbaum

Section 2704 of the Internal Revenue Code provides for special rules relating to the valuation of transfers of business interests to certain family members for estate, gift, and generation-skipping transfer tax purposes (collectively the “transfer taxes”).  Practically, § 2704 limits the ability to lower the value of a business interest as determined for transfer tax purposes by imposing certain restrictions on the interest, for example buy-sell provisions and their ilk.  Section 2704 has long been widely regarded, however, as having lost its bite and suggestions to give it new teeth have been included for several years running in the annual Greenbook.

For several seasons now the IRS has teased the coming of these proposed regulations, and they are finally here!  A copy of the proposed regulations can be found here.  The IRS is soliciting comments and discussion topic outlines which are due by November 2 in advance of a December 1 hearing.  Stay tuned for further discussion of the proposed regulations to come.

About the Author:
Dana M. Apfelbaum practices in the areas of federal income, estate, and gift tax law and family business succession planning. She counsels individuals in estate planning, with an emphasis on implementing the client’s objectives, asset protection and minimizing wealth transfer taxes. Ms. Apfelbaum also represents fiduciaries through all stages of probate, estate and trust administration. In addition, she represents businesses and business owners in all types of business and tax matters, including choice of entity, mergers and acquisitions, reorganizations, other general business matters, and succession planning. She may be reached at dapfelbaum@deanmead.com.