Treasury Announces Withdrawal of Proposed Section 2704 Regulations
     
 
Last year, the IRS proposed a series of regulations regarding how interests between family members in a closely held corporation could be transferred. If enacted, these regulations would have made substantial changes to how interests in family-controlled entities are valued for  gift, estate, and tax purposes. Fortunately, this proposal was recently withdrawn by the Treasury.
 
The Proposed Regulations
 
The proposed regulations under section 2704 of the Internal Revenue Code were primarily aimed at:
  • Treating lapse of voting and liquidation rights as an additional transfer for transfers made within three years of the death of an interest holder in a family-controlled company;
  • Eliminating discounts based on the transferee's status as an assignee and not a full owner;
  • Eliminating the ability of non-family member owners to block the removal of certain restrictions -- unless they held an interest for more than three years, owned a substantial interest in the company, and had the right to be bought out for cash by the company;
  • Clarifying the description of entities to include LLC's, corporations, and partnerships; and
  • Removing restrictions on liquidation when determining the fair market value of the interest being transferred.
If the proposed regulations had passed, minority and marketability discounts would have been eliminated. This in turn, would have made it more difficult and more expensive to gift interests in a family-owned business to younger relatives.
 
National Estate Planning Awareness Week
 
With National Estate Planning Awareness Week just around the corner, the timing of the Treasury's announcement that the proposed regulations be withdrawn is especially fitting. Since 2008, the third week of October has been dedicated to increasing public awareness of estate planning and its importance to financial wellness. Issues addressed by estate planning professionals include managing bill-paying and assets in the event of disability, supporting a charitable cause, naming a guardian for a child, financially supporting a disabled parent, providing for the long-term care needs of loved ones, and distributing retirement assets. This year, all events will take place October 16 through October 20 and will primarily focus on educating families on how to address their financial challenges and highlighting the important role of nonprofit organizations in financial planning.
 
Even those who already have an estate plan can take this time to review their wills or trusts and make any necessary changes to beneficiary designations, retirement accounts, and insurance policies. This is especially critical for anyone who has recently undergone a major life change, such as marriage  or remarriage, divorce, or the birth of a child.
 
Call Today to Discuss Your Case with an Experienced Atlanta Wills and Trusts Attorney
 
If you have questions about creating a will or trust, National Estate Planning Awareness Week is the perfect time to raise those issues with a skilled estate planning attorney. If you have concerns about the recently withdrawn regulations or another estate planning matter, please contact one of the experienced attorneys at  MendenFreiman  by calling 770-379-1450 today.
 
MendenFreiman LLP |   www.MendenFreiman.com 
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At MendenFreiman, we understand business and life can be complicated. For 20 years, we have made it our mission to identify and simplify complex business, wealth and life-planning issues for our clients. In addition to law degrees, most of our attorneys have earned advanced degrees in business, accounting or tax; and several are certified public accountants. This diverse combination of legal, management, tax and financial expertise sets our firm apart. Our clients trust us to help them solve complicated business planning, transactional, wealth transfer and estate planning matters.

Contact us for additional information:
5565 Glenridge Connector, N.E. | Suite 850 | Atlanta, GA 30342
Tel: 770.379.1450 | Fax: 770.379.1455
George D. Menden

Laura B. Traylor
Lawrence H. Freiman

Jeffrey J. Meek
Paige P. Baker

Katherine E. Trainor
James R. Kanner

Max R. Lafer
Nathan T. Johns
njohns@mendenfreiman.com
To comply with the U.S. Treasury regulations, we must inform you that (i) any U.S. federal tax advice contained in this newsletter was not intended or written to be used, and cannot be used, by any person for the purpose of avoiding U.S. federal tax penalties that may be imposed on such person, and (ii) each taxpayer should seek advice from their tax adviser based on the taxpayer's particular circumstance.