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On 2 August 2016, the Treasury Department released the much anticipated proposed Treasury Regulations under Code Section 2704, providing clarification and imposing further limitations on the use of valuation discounts for transfers of interests in family controlled entities for transfer tax purposes. The Proposed Regulations will thus create higher valuations for transfer tax purposes, which will result in higher transfer tax liabilities but also larger basis step-ups. The Proposed Regulations, if enacted in their current form, among other things, would essentially eliminate discounts for minority control and lack of marketability in transfer tax valuations of interests in closely held entities (e.g., family limited partnerships, closely held corporations, and other family controlled entities).

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