The Treasury and the IRS recently announced that they believe that the proposed regulations under Section 2704 are unworkable and should be withdrawn in their entirety. These proposed regulations released in August 2016 were the IRS’s attempt to severely reduce or eliminate the use of valuation discounts, such as discounts for lack of control and lack of marketability, when valuing ownership interests in family-controlled corporations, partnerships, and limited liability companies that are transferred among family members.
In April 2017, the President issued Executive Order 13789, which sought to reduce regulatory burdens on U.S. taxpayers. In June 2017, in response to Executive Order, the Department of Treasury identified the proposed regulations under Section 2704 as one of the eight significant tax regulations issued in 2016 and 2017 that would result in increasingly burdensome and complex Federal tax laws, and possibly exceed the statutory authority of the IRS.
As a result of their comprehensive review of the proposed regulations under Section 2704, and in their effort to reduce the complexity and lessen the burden of tax regulations, the Treasury and the IRS plan to publish a withdrawal shortly in the Federal Register.