Colorado Probate Blog - Wade Ash Woods Hill & Farley, P.C.

Family Business Valuation Proposed Regulations Withdrawn

In a notice issued by the IRS on October 17, 2017, Treasury has withdrawn the Proposed Regulations issued August 4, 2016 concerning the estate, gift and GST tax treatment of valuation of family-controlled businesses. These regulations were issued under Code Section 2704 and would have impacted planning involving the valuation of such interests for transfer tax purposes. After the proposed regulations were issued, numerous written comments were submitted and a public hearing was held on December 1, 2016. President Trump issued Executive Order 13789 on April 21, 2017, instructing the Secretary of the Treasury to review tax regulations issued on or after January 1, 2016, and to submit a report to the President by September 18, 2017. The Secretary recommended that the proposed regulations be withdrawn, and the Treasury Department and IRS have now done so.

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IRS Delays Basis Reporting for the Third Time

In Notice 2016-27, 2016-15 IRB 1, the IRS again delayed until June 30, 2016 the due date for filing new Form 8971 by an estate to report basis in a decedent's estate both to the IRS and to the beneficiaries.  As noted in earlier blogs, the "Highway Bill" signed into law on July 31, 2015 requires executors of estates filing U.S. Estate Tax Returns (Form 706) on or after that date to file a statement with the IRS within 30 days, and to report the fair market value of assets on the return to the beneficiaries.  The 2015 Form 1041 (U.S. Fiduciary Income Tax Return) includes provisions requiring consistent basis reporting.  The IRS had delayed the due date for new Form 8971 until February 29, 2016, then to March 31, 2016, and now to June 30, 2016.  The Form and Instructions are posted on the IRS website and proposed regulations have been released, but numerous questions have been raised.  The requirement to file Form 8971 does not apply to "portability returns" (those filed for estates with gross value less than the filing threshold solely to increase a surviving spouse's exemption), nor to assets that qualify for the charitable or marital deductions.  Basis must only be reported to beneficiaries who may receive property from an estate where those assets increased the federal estate tax.

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