This summer, an IRS executive publicly commented that the IRS will soon be introducing new regulations that will seriously limit discounting of interests in Limited Liability Companies (LLCs) and Family Limited Partnerships (FLPs). Until now, discounting and gifting of membership and partnership interests was a very effective way of keeping assets within the family as well as lowering estate tax liability. We have historically been successful in taking discounts of 30-50% on certain assets, thereby achieving substantially lower estate tax liability for many of our clients.
The IRS is expected to issue proposed rules on this issue this fall. Interestingly, for the last few years, the idea of limiting discounted interests has appeared in the President’s proposed budget, but was not acted upon. Now, the limitations on discounting are expected to be issued by the IRS itself, pursuant to the theory that the IRS has the authority to promulgate such revisions in law, rather than the President submitting the change to Congress.
Many families would benefit from discounted gifting of assets. Please contact us for additional information. We can assist you, including the discounting calculations and preparation of Memoranda of Gift and valuation calculation letters that the IRS will require for effective discounting and gifting. Time is of the essence, as there is talk within the practitioner community that there will be no “grandfather” period.
For additional information of FLPs, discounts and gifting, please see: