Client Alert: Proposed IRS Valuation Regulations Affect Family Limited Partnerships

The IRS recently issued its much anticipated proposed regulations under Section 2704 of the Internal Revenue Code dealing with the use of valuation discounts when transferring (during life or at death) interests in family limited partnerships (“FLPs”) and similar entities. FLPs and similar entities are frequently used in gift and estate tax planning to facilitate the transfer of minority or nonvoting interests to family members at values that are discounted from the pro rata value of the underlying assets. The proposed regulations, if finalized in their current form, would greatly limit the use of such valuation discounts.