A Brief Update on the IRS Proposed Regulations to Eliminate Gift and Estate Planning Discounts

In August 2016, the IRS has released proposed regulations that would drastically reduce the tax advantages of certain estate planning strategies many dealers use. If enacted, the new regulations would lower or eliminate estate and gift tax discounts (those allocated for lack of marketability and lack of control) that previously were permitted on the transfer of interests in family-owned corporations, partnerships, and LLCs. For many family business owners, this will mean paying much higher gift and estate taxes when transferring business ownerships to heirs. These regulations could possibly take effect early this year.

In fall 2016, the Dealership Industry Group at HBK CPAs & Consultants (HBK) conducted a webinar outlining the details of these proposed regulations and offered potential steps dealers could take to mitigate their impact. Since then, Donald Trump was elected President, which is likely to change the course of many rules, policies and laws, including these proposed regulations. In fact, in light of President Trump taking offices, it seems unlikely that these regulations will even be finalized.

The Trump administration is proposing changes in the estate tax arena though it is too early to tell whether or not these changes will be enacted.

Still, even though it’s always prudent to have a strategic estate and succession plans in place, the urgency for many dealers to complete family business transfers quickly has waned.

HBK will alert our clients, colleagues and associates of breaking news related to these proposed regulations. Contact us with questions on this or related issues, we are here to help.

About the Author(s)

Rex is a Principal of HBK CPAs & Consultants and directs the firm’s Dealership Group. He has worked extensively in the dealership industry since 1984 as a department manager, a general manager and an owner, as well as providing tax, accounting and operational consulting services exclusively to dealers as an independent CPA.

This experience includes working closely with hundreds of dealers from coast-to-coast since 1987 on creative tax planning and financial statements issues. He provides clients with a wide range of transaction work services, and consults for them in specialty areas such as operations, government regulatory compliance, valuations and M&A feasibility studies.

Rex is active in many professional associations. He is the current Chairman of the BDO Dealership Industry Group, contributes articles and commentary to dealership industry publications, is frequently called upon to speak to industry associations and conferences, provides expert testimony, and is regularly quoted by industry and the general media.

Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

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