IRS provides additional safe harbors for valuation freeze arrangements
Article Abstract:
Internal Revenue Code Section 2036(c) incorporates the appreciation of an enterprise transferred by an individual retaining a substantial interest in the enterprise, including income interests, into the individual's estate. Inclusion can be avoided if the retained interest is subsequently transferred within three years before the individual's death. The Internal Revenue Service classifies an arrangement as an enterprise on a basis of four criteria: the capacity to produce income or gain; the organization through which it is implemented; the previous business or investment purpose of the arrangement; and the property's investment potential. The IRS provides safe harbor for preferred interests similar to qualified debt arrangements if the interest: is in a new enterprise; has been created for the active conduct of business; and has an original transferee as a participant in active management.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1989
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Like-kind Prop. Regs. create new safe harbors while adding complexities
Article Abstract:
The IRS has issued Proposed Regulations in the area of like-kind exchanges that are intended to clarify unresolved issues, including related party transactions, the identification of replacement property, and replacement periods. Like-kind exchanges entail the transfer of productive property held for use in business or trade or for investment purposes for a like-kind property. Under section 1031(a)(1), no gain or loss is recognized for like-kind exchanges, but Section 1031(a)(3) restricts deferred exchanges by requiring identification of replacement property to be within 45 days and the receipt of replacement property within 180 days. The Proposed Regulations apply to transfers made after 2 Jul 1990, with an exception for transfers made by contracts in effect on 16 May 1990.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1990
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Chapter 14 comes into sharper (and harsher) focus in prop. regs
Article Abstract:
The Chapter 14 Proposed Regulations, newly published by the IRS, introduce revised freeze techniques that would still allow the transfer of equity in family situations with less taxation. Under the new provisions, this may be done through transfers of interests in partnerships and corporations using the subtraction method, qualified payments, or valuation adjustments. Another technique is the transfer of trust interests where the grantor keeps interest trusts that would eventually pass to others after some time. Family businesses may also be transferred at reduced cost through buy-sell agreements that would fix stock value for estate tax purposes. Published regulations on lapsing rights and certain restrictions are yet to be released.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1991
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