Treasury Department (IRS) Proposal Aims to Clamp Down on Tactic to Avoid Estate Tax

Richard Rubin reported in today’s Wall Street Journal that, “The U.S. government on Tuesday proposed making it harder for wealthy business owners to transfer assets to heirs without paying estate and gift taxes.

“The plan from the Treasury Department and Internal Revenue Service would place new limits on a common technique used to transfer interests in family businesses.

“The regulations address the practice of discounting the value of ownership stakes in closely held businesses or land. The discounts are permitted because some stakes are worth less since they are harder to sell or represent a minority interest. The reduced values allow wealthy families to pack assets inside the $10.9 million lifetime exclusion from estate and gift taxes for married couples.”

Mr. Rubin stated that, “The government has signaled for months that the regulations were imminent. Estate planners have urged clients to complete transfers before the government acted. Such efforts may accelerate, because the regulations must first go through a 90-day, public-comment period and parts of the regulations won’t take effect until 30 days after the government issues a final version.

“Estate and gift taxes apply at a top rate of 40% above the $5.45 million per-person exclusion, which means the estate tax affects about 0.2% of those who die each year. In 2014, about 5,200 estates filed taxable returns, according to IRS data.”

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