Business valuation professionals and estate planning attorneys can take a sigh of relief as United States Treasury Secretary, Steven T. Mnuchin, on October 2, 2017 proposed that the changes to Internal revenue Code Section(IRC) 2704 be withdrawn. The changes to this IRC regulation could have effectively eliminated discounts for lack of control and discounts for lack of marketability in family owned businesses. If the change to this regulation had been adopted it would have essentially ignored economic reality, artificially inflated values for many family owned businesses for gift and estate tax purposes, and would violate business valuation methodology that has been accepted by the federal tax court for decades. The ultimate effect of these changes could have potentially put many family owned business enterprises out of business with a disastrous effect on the national economy.
The National Association of Certified Valuators and Analysts (NACVA) and the American Institute of Certified Public Accountants( AICPA) took leadership roles in outlining to the United States Department of the Treasury the long term effect on family owned businesses of the proposed change to the IRC 2704 Regulations. Kudos to both of these professional organizations for their diligent and successful efforts in resolving this matter to a favorable outcome for family owned business in the United States.