By: Justin Linscott, CPA, CFP, CITP, CGMA- Principal

You may remember a blog I wrote on the topic of the possible changes on the horizon for estate and gift taxes. In that post (read it here:)  I mentioned that I would be traveling to Washington D. C. in early December to attend the hearing for Internal Revenue Code Section 2704. I have returned from my trip to the nation’s capital and I am still gathering my thoughts about the proposed regulations issued by the IRS that, if made final, would place major restrictions on estate valuation discounts.

Before I share some specifics about my trip, a reminder from my last blog about Section 2704 and the changes that could be coming that would make it harder for wealthy family and closely-held business owners to transfer assets to family members without paying the proper amount of estate and gift taxes……  IRC Section 2704 was enacted in 1990 and is designed to prevent the reduction of taxes through valuation discount techniques in an attempt to reduce the value of an estate, thus lowering the value of property and assets gifted to taxpayer’s beneficiaries. The new proposed regulations would change the landscape of this tax exercise drastically, no longer allowing for the understatement of the value of assets and interests as they apply to intra-family transfers. IRC Section 2704, as it stands now, only refers to corporations and partnerships. The proposed regulations would broaden the reach and also apply to limited liability companies and other entities and business arrangements.

My visit to D.C. was brief but busy. I walked a great deal and with each step I learned more and more about how these proposed regulations could affect our valued clients. Some occasions simply call for “boots on the ground” learning and this was one of those occasions.

When I say my boots were on the ground, I mean it in a literal sense…. I walked nearly 11 miles through the nation’s capital that day. I started by walking by the White House and then over to the Capital Building. There I met with some congressional aides that I know and we talked about tax policy. Tax is my passion and this was the ideal way for me to start my day. From there, I visited the Ways & Means Room. This is where much of our tax policy is written. My next stop was the IRS building where the Section 2704 hearing was taking place. This hearing was lengthy and interesting and my presence there positions me to better serve our clients should these proposed changes become reality. At the very least, I believe we will see significant  modifications take place. However, the extent of those modifications lies in the hands of the incoming presidential administration, the cabinet and the new treasury department. Should new changes become enacted, as it stands now, nothing will be final for 30 days. So for now, we watch and wait and I keep you posted on any and all new developments.

 As for how my trip wrapped up- after over six hours at the IRS building for the hearing, I made my way to the new Trump Hotel on Pennsylvania Avenue for a bite to eat and then went on to the National Archives to take a look at the Constitution and the Declaration of Independence. My next stop was the FBI Building, which has special meaning to me because my father and my uncle are both retired FBI agents. From there I took in some of the sights and sounds of the holidays in D.C. by witnessing the lighting of the national Christmas tree. My journey continued from with a visit to the Vietnam Wall and the Lincoln Monument and then I ventured across the Potomac River to Arlington National Cemetery to wrap up my day.

While it was the 2704 hearing that prompted my trip to Washington, D.C.- it was very rewarding (and a bit tiring) to also use the day to enjoy all that they city has to offer.  Again, I will keep you posted on 2704. Feel free to reach out to me with any questions you may have. I would be happy to sit down with you and review your estate plan ahead of these proposed changes.