Playbook Logo

Client Login

Click to toggle search bar

Transfer of Family Company Interest May be Changing

Our Latest Insights

The Green Group
September 17th, 2015

The IRS may be signing new regulations to limit discounts on the transfer of family company interests. 

It was generally recognized that “discounts” could be applied in valuing transfers of business interests among family members.

There were two recognized types of discounts:

  1.  A lack of marketability of the interests and these discounts ran from 25% (conservative) to 40%
  2. If the transfer represents a minority interest in the business (lack of control these discounts ran from 10% to 25%)

New Proposed Regulations

The IRS expects to issue new regulations in the next month or so.  These are armed specifically to family companies that “hold securities,” but family owned businesses that operate companies may also be subject to discount restrictions.

It appears, at this time, that the new regulations will be prospective and not relocations.

Suggestion

If you are considering a transfer of a stake in a closely held company to a family member, it may be smart to discuss such a transfer with your accountant now before the new restrictions take effect.

Share This:

Related Insights

Due to an error, taxpayers are receiving Identity Protection PIN letters with an incorrect year listed.

The Green Group
1/6/16

Beginning for the 2016 filing tax year, there will new due dates for Partnership, C-Corp, and FBAR returns.

The Green Group
10/26/15

In March, we put together a post on various IRS scams that are prevalent this year.

The Green Group
5/7/15
Taxonomy: 

The IRS may be signing new regulations to limit discounts on the transfer of family company interests. 

It was generally recognized that “discounts” could be applied in valuing transfers of business interests among family members.

There were two recognized types of discounts:

  1.  A lack of marketability of the interests and these discounts ran from 25% (conservative) to 40%
  2. If the transfer represents a minority interest in the business (lack of control these discounts ran from 10% to 25%)

New Proposed Regulations

The IRS expects to issue new regulations in the next month or so.  These are armed specifically to family companies that “hold securities,” but family owned businesses that operate companies may also be subject to discount restrictions.

It appears, at this time, that the new regulations will be prospective and not relocations.

Suggestion

If you are considering a transfer of a stake in a closely held company to a family member, it may be smart to discuss such a transfer with your accountant now before the new restrictions take effect.