President Trump’s Executive Order Deals Blow to Proposed 2704 Regulations

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by Jeramie J. Fortenberry, JD, LLM (Taxation) | Director of Education, WealthCounsel

Since their publication on August 4, 2016, the proposed regulations on valuation discounts for family-owned businesses under Internal Revenue Code (Code) § 2704 (Proposed Regulations) have drawn the ire of the estate planning community. The Proposed Regulations made several significant changes aimed at restricting the use of minority discounts to transfer family-controlled business interests at a lower estate tax value.

The end of uncertainty might be in sight with President Trump’s issuance of Executive Order 137891 and the corresponding implementation by the Internal Revenue Service (IRS) in IRS Notice 2017-382. Notice 2017-38 was issued in response the Executive Order’s requirement to identify and reduce regulatory tax burdens. By identifying Code § 2704 as burdensome, Notice 2017-38 dealt a critical—and perhaps fatal—blow to the Proposed Regulations. This article summarizes Notice 2017-38 and its effect on the Proposed Regulations.