Today the IRS released proposed regulations concerning the valuation of interests in corporations and partnerships for estate, gift, and generation-skipping transfer tax purposes. Specifically, the proposed regulations concern the treatment of certain lapsing rights and restrictions on liquidation in determining the value of the transferred interests.
The proposed regulations would amend Treas. Reg. § 25.2701-2 to (1) address what constitutes control of a limited liability company or other entity or arrangement that is not a corporation, partnership, or limited partnership, and (2) refine the definition of the term “applicable restriction” by eliminating the comparison to the liquidation limitations of state law. The proposed regulations would also amend Treas. Reg. § 25.2701-1 to address deathbed transfers that result in the lapse of a liquidation right and to clarify the treatment of a transfer that results in the creation of an assignee interest. Further, the proposed regulations would add Treas. Reg. § 25.2701-3 to address restrictions on the liquidation of an individual interest in an entity and the effect of insubstantial interests held by persons who are not members of the family.
A public hearing on the proposed regulations has been scheduled for December 1.