New Section 2704 Regulations and Family Partnerships: Navigating the New Discounting Rules for Family-Controlled Entities

Recording of a 110-minute CPE webinar with Q&A


Conducted on Tuesday, October 18, 2016

Recorded event now available

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Program Materials

This CPE webinar will provide tax advisers who work with high net worth individuals and partnership structures with a thorough and comprehensive guide to the tax implications of the newly proposed Section 2704 regulations, specifically within the context of family limited partnerships, family limited liability companies and other family-controlled entities. The speaker will discuss the current landscape involving valuation discounts for estate and gift tax purposes, and detail the specific issues that the proposed regulations will create for existing family entity structures. The webinar will also address the interplay between estate planners and income tax advisers, in particular with respect to planning to obtain a step-up in basis upon death.

Description

On August 2, 2016, the U.S. Department of the Treasury and the Internal Revenue Service issued proposed regulations under Section 2704 of the Internal Revenue Code that, if enacted in its present form, would very significantly curtail the ability of taxpayers to claim valuation discounts for both lack of control and lack of marketability in family-controlled entities. Control in this context generally means at least 50% ownership of a corporation, partnership or limited liability company taking into account certain complex family attribution rules. Except in certain limited circumstances, these proposed regulations would blur the distinction between (i) active trades or businesses and (ii) entities that are holding companies for passive assets such as publicly-traded securities. In addition, certain clawback provisions could potentially apply to transactions entered into prior to the finalization of these regulations. It should be noted that, under the proposed regulations, valuation discounts would still likely be available for most tenancy-in-common interests in real property, except perhaps where the tenancy-in-common interests would be regarded as partnerships for federal income tax purposes.

The overall impact of these proposed regulations in many client contexts will be very severe. A hearing is scheduled on these proposed regulations in Washington D.C. on December 1st. It is conceivable, however, that the proposed regulations may be enacted in final form by the early part of 2017. In the meantime, there is a window of opportunity for individuals to engage in estate planning involving interests in closely-held entities that may soon effectively be lost come early 2017.

This program will discuss what you need to know in advising your clients on the massive changes in the estate planning landscape ushered in by these proposed regulations.

Listen as our experienced panel of partnership and estate advisers offers a critical first look at the newly proposed regulations and offers practical guidance on the effect of the new regulations on family partnerships and other family-controlled entities which have claimed valuation discounts.

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Outline

  1. Content of newly-proposed Section 2704 regulations
  2. Open issues and areas that may be challenged in comment letters to be submitted by professional organizations
  3. Estate planning in light of the proposed Section 2704 regulations

Benefits

The speaker will discuss these and other important issues:

  • The new Section 2704 regulations and their impact on FLPs, FLLCs and other family controlled entities
  • What transactions would be covered by the proposed regulations
  • The potential application of a three-year clawback to transactions entered into prior to the date of finalization of the proposed regulations
  • The valuation implications resulting from the proposed regulations
  • Advising your clients on estate planning in light of the proposed regulations

Faculty

Dave Banerjee
Dave Banerjee

Dave Banerjee CPA

Mr. Banerjee’s practice is focused on advising financial service firms and investment advisors on complex...  |  Read More

Matz, Kevin
Kevin Matz, Esq., CPA, LL.M. (Taxation)

Kevin Matz & Associates

Mr. Matz's practice is principally devoted to domestic and international estate and tax planning, estate...  |  Read More

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