Looming Regulations Could Substantially Increase Taxes on Transition of Business Interests

The IRS has proposed regulations that could significantly limit a business owner’s ability to transfer business interests to family members in a tax efficient manner. The proposed regulations might also cause adverse consequences with respect to existing estate and business transition plans.

These regulations would:

  • Curtail or possibly eliminate a business owner’s ability to substantially reduce gift and estate taxes by transferring business interests to family members at discounted values
  • Cause an artificial increase in the value of a business owner’s estate for federal death tax purposes; and
  • Potentially affect the disposition and taxation of assets under estate and business transition plans that were put in place before the regulations were even proposed

While no one can predict with certainty when or if the regulations will be finalized, procedures are in place to allow the IRS to finalize them at any time after December 1, 2016. Business owner clients should call us to discuss what steps they might take now to mitigate adverse consequences if and when the proposed regulations are adopted. For example, gifting of business interests before the regulations become effective might help ensure application of discounts available under current law. Such gifts should not be made without advice of counsel, however, as an improperly timed or structured gift can have significant adverse tax and other consequences.

For More Information

If you have any questions regarding this News Alert, please contact Jay R. Wagner at 610.478.2109, C. Thomas Work at 610.478.2084, Megan E. Thomas at 609.734.6196, Heather Eshelman McCusker at 609.243.6433, or the Stevens & Lee attorney with whom you normally consult.

This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.