The Treasury Department and the IRS have announced that proposed regulations that would have drastically limited valuation discounts for transfers of family businesses are being withdrawn.
Q: What would the proposed regulations have done?
A: The regulations would have curbed valuation discounts commonly used when family business owners transfer minority shares to other family members.
Q: What does the withdrawal of the proposed regulation mean for family businesses?
A: The withdrawal means that family business owners will still be able to transfer a portion of their business to their children while applying valuation discounts. Primarily, those discounts include adjustments for lack of control and lack of marketability.
Q: What was the argument for the withdrawal?
A: Proponents argued that such valuation discounts are fair and legitimate because a minority transfer does not provide children with a controlling interest in the business and those shares cannot be readily sold like publicly traded stocks.
Q: Why was the withdrawal initiated?
A: The U.S. Treasury initiated the withdrawal in response to President Donald Trump's executive order directing a reduction in regulatory tax burdens.
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