The IRS has published proposed regulations that, when issued in final form, will severely curtail the use of valuation discounts in order to transfer interests in family controlled entities, such as corporations, partnerships, and limited liability companies, to family members at reduced gift and estate tax cost. The new valuation rules would apply regardless of whether an entity conducts an active business. In some cases, they may apply to transfers of a manager’s interests in a private equity or hedge fund.

The new valuation rules will apply to transfers occurring after the date the regulations are published in final form. That date will not occur until after a public hearing scheduled for December 1, 2016.