Trump administration scrapping estate-tax rule affecting wealthy business owners

The regulation would have eliminated business-valuation discounts used to reduce estate and gift taxes

Oct 5, 2017 @ 5:08 pm

By Greg Iacurci

The Treasury Department is withdrawing a proposed regulation that would have changed how wealthy business owners can pass on businesses to children and other heirs.

Currently, individuals are able to discount valuations of stakes in family-controlled businesses in order to reduce the taxes due upon transfer of that entity during one's lifetime or at death. A 40% levy is applied to estate values exceeding $5.49 million.

The rule, proposed in the waning months of the Obama administration under Section 2704 of the tax code, would have eliminated such business-valuation discounts and, in the process, a key tax-planning strategy used by the super wealthy.

"Treasury and the IRS currently believe that these proposed regulations should be withdrawn in their entirety," Treasury Secretary Stephen Mnuchin wrote in a document published Monday that lays out areas identified as tax regulatory burdens.

The Treasury and Internal Revenue Service plan to publish a withdrawal of the proposed regulation "shortly" in the Federal Register, according to the document, which called the rule "unworkable."

The Obama administration's primary aim was to prevent a tax strategy allowing wealthy individuals to put marketable securities into a business like a limited partnership, and transfer those securities at a discounted valuation.

"The IRS thought that was gaming the system. They really bristled at that," said Richard Behrendt, an estate planning attorney at Behrendt Law.

However, critics of the regulation believed it to be overly broad, thereby hurting family businesses in order to curb the abuse, Mr. Behrendt said.

A repeal of the federal estate tax, as has been proposed by congressional Republicans and the Trump administration as part of a tax-reform package, would also have meant scrapping the regulation.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

INTV

Advisers beware: tax law has unintended consequences

Commission accounts could be preferable for some clients, and advisers could be incentivized to move from employee broker-dealers to independent channels.

Recommended Video

Path to growth

Latest news & opinion

Fidelity charging new fee on Vanguard assets held in 401(k) plans

The 0.05% fee is ostensibly a response to Vanguard's distribution model, but may also make the company's funds less attractive due to higher cost.

UBS adviser count continues to decline

Firm to merge U.S., global wealth management units on Feb. 1

TD Ameritrade launches all-night trading for ETFs

Twelve funds now can be traded after-hours, but the list will grow, company says.

Cutting through the red tape of adviser regulation is tricky

Don't expect a simple rollback of rules under the Trump administration in 2018 — instead, regulators are on pace to bolster financial adviser oversight.

Bond investors have more to worry about than a government shutdown

Inflation worries, international rates pushing Treasuries yields higher.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print