Treasury Issues Proposed Regulations in an Effort to Remove “Minority Interest Discounts” when Valuing Family Businesses for Estate and Gift Tax Planning Purposes

Posted by lgtcpa on Aug 22, 2016

In recent years, when valuing a “less than a controlling interest” in a closely held company, a “minority interest discount” has been applied when gifting, or otherwise transferring such minority interest to a family member.

This minority interest discount reduces the value of the gift to a family member for gift tax purposes. This discount has been a planning technique over the years to reduce the taxable estate of the transferor.

However, the Internal Revenue Service and the Treasury Department recently issued proposed regulations attacking this concept of “discounting”. Thus, until these proposed regulations are finalized (perhaps, as early as the 1st of December 2016), the clock is ticking for use of a minority interest discount (and possibly other discounts) as a gift and estate planning tool. As a result of these published proposed rule changes, taxpayers may want to consider making gifts of ownership in a closely held business to family members while discounting is still allowed.

If you would like further information about this proposed regulation, or have any other questions about estate and gift tax issues, please contact one of our LGT tax professionals today.

Seek the services of a legal or tax adviser before implementing any ideas contained in this blog. 


Topics: Accounting Tips, Tax