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Legal Alert: Plan Ahead for Gift and Estate Transfers of Family-Controlled Entities

The IRS recently proposed new Regulations that, if finalized as written, will eliminate or severely affect, the ability to utilize valuation discounts on the transfer of an interest in a family-controlled entity, regardless of whether such entity operates an active or passive business.  Valuations of a transferred family business interest typically take into consideration discounts for lack of control and lack of marketability.  These discounts allow donors to transfer interests in family-controlled businesses at a reduced price, thereby allowing the transfer of a greater amount of wealth.  Although business owners may continue to gift minority ownership interests, the potential loss of these valuation discounts will reduce the amount that one can transfer free of gift, estate and generation skipping transfer taxes.  The Proposed Regulations may not be adopted as written; however, now is the time to consider planning opportunities. Please contact us if you would like to discuss any tax planning opportunities for your family-controlled business.

James H. Brun
Partner
(513) 579-6585
jbrun@kmklaw.com

Alan S. Fershtman
Partner
(513) 579-6961
afershtman@kmklaw.com

Bill Keating, Jr.
Partner
(513) 579-6435
wkeating@kmklaw.com

Margaret G. Kubicki
Of Counsel
(513) 579-6913
mkubicki@kmklaw.com

Claire V. Parrish
Partner
(513) 579-6936
cparrish@kmklaw.com

Joseph P. Rouse
Partner
(513) 579-6417
jrouse@kmklaw.com

Mark E. Sims
Partner
(513) 579-6966
msims@kmklaw.com

KMK Legal Alerts and Blog Posts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.

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IRS Circular 230 Disclosure: Unless we have specifically stated to the contrary in writing, any discussion of federal tax issues or submissions in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the United States federal tax laws or (2) promoting, marketing, or recommending to anyone any transaction or matter addressed herein.