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November 30, 2017


Unpopularity of IRS estate-tax regs hard to overstate

Some Texans with financial concerns go to bed at night worrying about things like student tuition and credit card debt.

Others, though, more likely have bad dreams about what a recent Forbes article calls “the fear of 2704 regs looming.”

Concededly, many people have no concern with that number or what it might entail.

If you are the owner of a family business or are otherwise engaged in a high-paying career in the Dallas-Forth Worth metro area or elsewhere in Texas or nationally, though, you might well have a bit of an adverse reaction every time you see it.

What is the 2704 regs debate/controversy all about?

Any IRS-authored regulation is going to be complex, which the 2704 regs certainly are.

Additionally, though, and as noted by Forbes, Section 2704 is “burdensome” and “unworkable.” Legions of critics across the country have blasted its proposed rules that would eliminate certain discounts used in assessing the market value of an asset for gift-tax and estate purposes, and tack on others.

Application of the rules would increase estate valuations in many instances and yield more onerous exactions in tax liability. And not just for business partnerships: intrafamily wealth transfers outside of any business context could also be affected.

The Section 2704 timeline: Where do things stand now?

The IRS offered up its proposed changes in the autumn of 2016. Suffice to say that they have conjured up a steady drum roll of condemnation and demands for repeal ever since.

The above-cited Forbes piece duly notes that the 2704 regs “were on [the president’s] April executive order hit list of potentially burdensome regulations.”

The IRS took quick notice of the widespread discontent surrounding Section 2704, and sought public comment on its regulations.

The result: an avalanche of negative reactions grounded in complaints that the agency’s proposed curbs on discounts were arbitrary, nonsensical and highly unfair to would-be wealth transferors.

The criticism bore fruit, as evidenced by the U.S. Treasury Department’s recent announcement that it would withdraw the tax regulations.

The feds’ view of Section 2704 was clear enough, with its final report on the regs stating that the IRS “approach to the problem of artificial valuation discounts is unworkable.”

One critic went further, charging the agency with “mucking up an area that was already difficult to navigate.”

If you are a family business owner or other individual focused upon estate asset transfer, what might you reasonably think in the wake of all the dramatic 2704-related activity?

Forbes notes that, for starters, you might now be able to take a breath that is free of worry concerning imminent financial fallout from Section 2704 relevant to any transfer.

Notwithstanding that, though, tax regulations affecting legacy planning continue to be both complicated and evolving.

If you’re concerned, you might want to solicit some solid legal advice from a proven tax attorney.