Love him or hate him, it seems that with the election of Donald Trump in November of 2016, some not so friendly Proposed Regulations under IRC Section 2704 relating to the valuation of family owned businesses may indeed be on the chopping block.

The Proposed Regulations, issued August 2, 2016, attempted to do many things to curb what the IRS considered "abusive". Some proposed changes were:

(1)     Fundamentally change the definition of fair market value. Fair market value assumes a hypothetical willing buyer/seller.  These proposals would assume particular buyers and sellers.

 

(2)     If family members held a controlling interest (even through attribution), the Proposed Regulations would require that an interest being valued has liquidation rights (when in reality it would not).

 

(3)     The Proposed effectively would force "put" provisions  that can be exercised at almost anytime, which is not realistic and does not occur in the market place.

 

President Trump, in executive order 13789, directed a review of regulatory actions that would be considered burdensome.  The Proposed Regulations were listed in an IRS Notice indicating they are Regulations that could be streamlined or withdrawn. 

The Treasury Department is to issue a final report by September 18, 2017, and recommend how they plan to address the Proposed Regulations (among others).  A recommendation could be from modification to full repeal.

Although not over yet, we hope to see a full repeal of the Proposed Regulations or substantial modifications.