The IRS has proposed changing the rules for valuing family limited partnerships and other family-controlled businesses, including corporations and partnerships (collectively “Family Businesses”). Valuations of these Family Businesses are needed for gifting and estate tax purposes. The current rules allow the application of discounts for lack of control (“DOLC”) and discounts for lack of marketability (“DOLM”) to the Family Businesses. These discounts typically can range from 10% to 40%. The IRS has proposed a regulation that will eliminate the DOLC and DOLM discounts for the Family Businesses, increasing the value of the gifted shares and potentially the estate tax on these assets. The proposed regulations have been issued for comment, no effective date has been set yet, but several business valuation experts are concerned that these rules will be made effective as of January 1, 2017 which is approximately 30 days after the comment deadline.
In order to not be impacted by these regulations, it is prudent for any family who is considering transferring shares of a Family Businesses in the near term that could be impacted by estate taxes, to strongly consider having a valuation prepared in 2016 prior to the implementation of the new regulations.
Day Seckler is available to prepare a valuation of your or your client’s Family Businesses. We would be glad to provide a brochure documenting our qualifications and experience in this area. Please contact Wayne Day at Wday@dayseckler.com or 845-765-0705 if you have any questions regarding the valuation of your or your client’s Family Businesses.