Artificial valuation of closely held interests: sec. 2704

Article Abstract:

Family owned business enterprises are over-valued for tax purposes due to Section 2704, which incorrectly assumes that family agreements are primarily created to reduce estate taxes. The section's anti-abuse provisions essentially impose liquidation value on family business owners, causing transfer taxes to be figured on valuations higher than fair market value. However, the application of Section 2704 can be avoided by careful strategy, depending on the type of business entity and the state's Default Rules.

Methods, Transfer taxes, Close corporations, Closely held corporations, Family corporations

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Preparing valuation reports to withstand judicial challenge

Article Abstract:

Preparers of business interest valuation reports should consider the US Tax Court's decisions criticizing such reports to reduce the likelihood of judicial rejection of methods employed. An important planning goal is to accurately determine fair market value and retain evidence to substantiate that determination. Valuation of interests in family limited partnerships are particularly vulnerable to IRS attack for lacking substance and denial of IRC section 2703 safe harbor treatment.

United States, Public Finance Activities, Tax Administration, Small Business, Business enterprises, Limited partnership, Limited partnerships

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