The estate-planning world is still buzzing over the § 2704 proposed regulations released last month. These regulations restrict discounts that may result in a net loss of revenue to the Treasury with higher transfer tax values, leading to higher bases for transferees. Seemingly, increases in the estate tax that result from higher valuations would offset the income tax losses on later dispositions of the inheritance. However, this valuation also applies to estates that are not large enough to incur an estate tax, further binding them to the reductions in discounts from the new proposals. Additionally, the IRS is also bound. It can potentially foresee a diminishment in income tax revenues when heirs sell those inheritances for a smaller gain. Consequently, businesses that have been successful but not lavishly so can benefit from passing inheritances to those with higher bases, creating the diminishment of future income tax liabilities and no estate tax burden.
See Dominick Schirripa, The Law of Unintended Consequences Meets the §2704 Proposed Regulations: Will Estate Tax Increases Cause Income Tax Reductions?, Bloomber Estate Tax Blog, September 15, 2016.
Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.
