The U.S. Treasury Department and IRS today released for publication in the Federal Register a notice of withdrawal of proposed regulations (REG-163113-02) under section 2704 concerning the valuation of interests in corporations, partnership, and other entities for purposes of the estate, gift, and generation-skipping transfer taxes.
Read the notice of withdrawal of the proposed regulations [PDF 196 KB]
The withdrawal of these proposed regulations is pursuant to an executive order and was announced earlier this month in a Treasury report.
President Trump in April 2017, signed an executive order (Executive Order 13789) directing the U.S. Treasury to examine recent tax regulations to determine whether any of the regulatory projects: (1) imposed an undue financial burden on U.S. taxpayers; (2) added undue complexity to the federal tax laws; or (3) exceeded the statutory authority of the IRS. According to the executive order, Treasury was to take “appropriate steps” to delay or suspend the effective date of the identified regulations, and to modify or rescind the regulations, through notice and comment rulemaking.
The executive order directed Treasury to review “significant tax regulations” issued on or after January 1, 2016, and to issue reports according to a timetable.
The IRS on July 7, 2017, released Notice 2017-38 [PDF 38 KB] providing an interim list of eight tax regulations identified as either imposing an undue financial burden on taxpayers, or adding excessive complexity to the tax system (none of the regulations was identified as exceeding statutory authority). Included in the eight regulatory projects were the proposed regulations (REG-163113-02) concerning estate and gift tax under section 2704, and specifically concerning restrictions on the ability to dispose of or liquidate family-controlled entities, by creating an additional category of restrictions that also would be disregarded in assessing the fair market value of an interest.
The U.S. Treasury Department on October 4, 2017, released a final report with recommendations for specific actions to mitigate the burden imposed by regulations previously identified as either imposing an undue financial burden on taxpayers, or adding excessive complexity to the tax system. A related Treasury release states that the proposed regulations under section 2704 would be withdrawn because they:
“…would have hurt family-owned and operated businesses by limiting valuation discounts. The regulations would have made it difficult and costly for families to transfer their businesses to the next generation.”
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