The Internal Revenue Service’s controversial proposed estate tax rules on valuation discounts could be withdrawn after Donald Trump enters the White House, but McGuireWoods partner Dennis Belcher sounded a note of caution about that prospect in a Dec. 13 Bloomberg BNA article.
The proposed rules under tax code Section 2704 would change the valuation of interests in family-owned businesses for purposes of estate, gift and generation-skipping transfer taxes. The regulations won’t be finalized before President Barack Obama leaves office in January, and some opponents hope Trump’s administration will withdraw them. Trump has called for repealing the estate tax, which would make the new rules unnecessary.
Belcher, co-chair of the firm’s nationally recognized Private Wealth Services Group, warned in the Bloomberg BNA story that the proposed new rules may not be gone for good. “I think 2704 is on hold until next May,” he said. “Then I think it will come right back.”
Belcher said Congress will have difficulty coming up with a replacement system if the estate tax is repealed. Trump proposed taxing capital gains held until death above an exemption amount of $10 million. The Bloomberg BNA story notes that a similar system is used in Canada. “That’s an extremely complicated system,” he said.
Belcher and fellow McGuireWoods partner Ron Aucutt testified at a Dec. 1 IRS hearing on the proposed rules and advocated for a “carve out” for entities that function as operating businesses.