Following the December 1, 2016 public hearing, the IRS reportedly began working on revisions to and clarifications of the new 2704 proposed regulations. While the uproar from the estate planning and accounting communities was almost unanimous, the IRS has said the proposed regulations have been widely misinterpreted and are not intended to eliminate minority discounts or require valuation as if a “put” right existed in all cases. The IRS is said to be working on a family business exception as well.

On January 20, 2017, President Trump issued a blanket executive order staying any enactment of new federal regulations not yet published to give his administration time to evaluate its policies, etc. For regulations already published but not yet effective, including the 2704 proposed regulations, enactment was postponed for at least for 60 days. That stay will expire on March 21, 2017, at which time the new regulations could be finalized and become effective at such time, although the “disregarded restrictions” provision of the new regulations would take effect 30 days later. However, most commentators do not think the regulations will be finalized so quickly, if at all, given that President Trump and the Republican Congress have both expressed an intention to repeal the estate tax.

Despite the uncertainty, gift tax return preparers should be aware that IRS disclosure rules may require the preparer to consider the proposed regulations. The gift tax adequate disclosure rules require disclosure if any position reported is contrary to existing or proposed regulations, so the 2704 proposed regulations are arguably implicated. It is suggested that any gift tax return reporting a transfer of a closely-held business after August 4, 2016 (which is when the proposed regulations were published) include a statement that the 2704 proposed regulations were not taken into account in determining the value reported because, given the effective date provisions of the proposed regulations, there is no requirement that the 2704 proposed regulations be considered.