The New York Times recently reported more on this subject in “Navigating Tougher I.R.S. Rules for Family Partnerships.” It appears that there may be new regulations restricting what will be allowed with family partnerships. There’s no definitive information on the exact terms of those regulations, their effective date or whether or not the wealthy should scramble to make transfers now.
The White House estimated in 2012 that closing this loophole could net at least $18 billion in tax revenue over 10 years. Assets in family partnerships, like securities and cash, still have a value that does not support a discount of 30%. Some advisers argue that the partnership, not the individuals, controls when securities are bought and sold and distributions are made. However, tax experts expect that entities set up to hold businesses or assets that require consolidated management, like rental properties, will still see some discount.
If a family has significant real estate, typically they use discounts to transfer interest in the entity. If you’re already setting up a partnership or making gifts to one to accelerate what they were doing, get it in under the deadline. The IRS won’t make the date retroactive, so get going.
Talk to your estate planning attorney about how this change may affect your estate planning.
Reference: The New York Times (August 17, 2015) “Navigating Tougher I.R.S. Rules for Family Partnerships”