In my August 15 blog, I noted that proposed regulations issued by the Treasury Department and IRS would significantly limit the ability to use valuation discounts in the context of transferring interests in family-owned entities to family members. These regulations would have a particularly significant impact in the case of real estate business owners.
All business owners have an opportunity to take advantage of discounts now by gifting family entity interests before the rules become final. However, when you have a real estate entity, there are some special considerations. With real estate, the income tax basis of the assets could be significantly lower than the market value because in real estate you can depreciate the assets as well as refinance mortgages and distribute additional dollars out to the owners.