A proposal from the Internal Revenue Service (IRS) would change the way family-owned businesses are valued when ownership is transferred within the family.
The proposed change to Section 2704 may result in higher tax liability for family business transfers. The proposal sets limits, or may eliminate, valuation discounts that business owners may take when passing the business along to another family member. The proposal also includes a three-year “lookback” provision that would revisit the validity of the valuation discount if the owner should die within three years of the transfer.
Chris Hennessey discusses the background of the proposal and its potential impact on taxes.
- The rule limits a family’s ability to discount the value of its business
- Family business owners may want to consider other estate transfer options, such as a Grantor Retained Annuity Trust
- Seek out professional advice to identify what actions to take in advance of a rule change
For informational purposes only. Not an investment recommendation.
This information is not meant as tax or legal advice. Please consult with the appropriate tax or legal professional regarding your particular circumstances before making any investment decisions. Putnam does not provide tax or legal advice.