Traditionally, families have relied on valuation discounts when transferring interests in closely-held family businesses to the next generations. Transfers of minority interests in a closely-held family entity were generally allowed a minority discount when valuing interests for estate and gift and tax purposes, primarily due to the inability of a minority shareholder to compel a liquidation of the entity. These discounts often proved to be a helpful way for the family to avoid the need to sell the family business to pay estate taxes, by reducing the gift and estate tax burden on such transfers. The proposed regulations effectively eliminate any minority discounts and largely any marketability discounts on the valuations for estate and gift tax purposes. If these regulations are finalized, they would impact transfers between family members of interests in family-controlled corporations, partnerships, LLCs and other business entities, regardless of whether the business is active or passive.
- Editor in Chief, Co-Chair, Nonprofit and Social Impact practice group
- Chair, Tax Department and Co-Chair, Nonprofit and Social Impact practice group