Presenting a live 90-minute webinar with interactive Q&A Navigating the New Section 2704 Discount Valuation and Transfer Regulations: What Estate Planners Must Do Now TUESDAY, OCTOBER 11, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Susan Peckett Witkin, Partner, Blank Rome , New York James G. Blase, Principal, Blase & Associates , Des Peres, Mo. Edwin P . Morrow, III, Esq., Director, Wealth Transfer Planning and Tax Strategies, Key Private Bank Family Wealth Advisory Services , Dayton, Ohio The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 . NOTE: If you are seeking CPE credit, you must listen via your computer — phone listening is no longer permitted.
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Proposed Regulations Threaten to Create Higher Valuations for Family Businesses Understanding the Impact, The Proactive Planning Opportunities, the Traps and Uncertainties of Proposed Section 2704 Regulations October 11, 2016 Strafford Webinar CLE/CPE
Speakers for Today’s CLE/CPE Susan Witkin, J.D., LL. M. Partner, Blank Rome, LLP Tax, Benefits and Private Client Group- New York office Edwin P. Morrow III, J.D., LL.M. Director, Wealth Transfer Planning and Tax Strategies Key Private Bank Family Wealth Advisory Services James G. Blase, CPA, JD, LLM Principal Blase and Associates, LLC 6
Topics Discussed – Agenda • History and Principles of Valuation for Gift, Estate and GST Tax Purposes and How Newly Proposed Regulations May Change This • Explaining §§2701, 2704(a) and 2704(b) Proposed Changes; Three Year Rule; Disregarded Restrictions • Effect of §2704 on Income Tax Basis and §§1014-1015 • The Likely Effective Date of Proposed Regulations • Are They Within Treasury’s Authority to Promulgate? • Planning Opportunities Pre-Finalization and Effect on Wealth Transfer Planning Assuming They Are Finalized – Effect on Trusts, Buy-Sell Agreements, Buy-Outs • Panel Discussion 7
A Brief History of (not Time, but) Code Section 2704 and existing regulations October 11, 2016 Susan Peckett Witkin Partner, Blank Rome LLP
Su Susan Pec eckett Wit itkin Par artner, Blan lank Rom ome LLP LLP New Yor ork, NY 21 212.8 2.885 85.51 5190 0 SWitk itkin@BlankRome.com Susan Peckett Witkin concentrates her practice in the areas of trusts and estates and tax law. She advises clients on a wide variety of estate planning, estate and trust administration and estate and trust litigation matters, and represents both beneficiaries and fiduciaries. Ms. Witkin provides tax and related advice to individuals, fiduciaries and privately held companies in areas such as intergenerational transfer tax planning, business succession, insurance, entity formation and management, charitable giving arrangements, estate and tax planning for foreign individuals and trusts and multinational families, tax controversies and FBAR and FATCA compliance, distribution planning for IRAs and qualified plans, income tax planning and trust company formation, and provides counsel regarding the duties and responsibilities of trustees, executors, guardians and other fiduciaries in various situations. She is frequently involved in the negotiation and preparation of pre- and post-nuptial agreements and the tax and property issues relevant to divorces and separations. Ms. Witkin is an adjunct professor of law at New York University School of Law and previously taught as an adjunct professor of law at St. John’s University School of Law. Ms. Witkin has written and co-authored articles for various publications, including the New York Law Journal, and was one of the principal authors of the April 2012 report of the New York State Bar Association’s Tax and Trusts and Estates Law Sections titled “Repo rt on Notice 2011-101: Request for Comments Regarding the Income, Gift, Estate and Generation-Skipping Transfer Tax Consequence of Trust Deca nting,” providing the Internal Revenue Service with a response to its requests for comments on various tax issues implicated in the decanting of trusts. She has been a lecturer and moderator in various contexts, including for the American Bar Association, the California State Bar Association and the Practicing Law Institute, and frequently presents programs to various groups, including attorneys, accountants, clients and their advisors, women entrepreneurs, and entrepreneurs in the healthy living space. She served for many years as a chair of various committees of the American Bar Association's Section of Real Property, Probate and Trust Law (now the Section of Real Property, Trusts and Estates Law). She is currently an active member of the New York City Bar Association's Animal Law Committee, focusing on legal issues of animal welfare and management, rights of individuals to have support animals in various settings, and the ethical treatment of animals in agriculture, among others. She is heavily involved in various projects for the Committee that promote the welfare of animals particularly in the farm industry (including, most recently, the Committee’s submission of extensive comments to the USDA’s proposed organic farming regulation s), animal rescue operations, and proposals relating to endangered animals. She represents Ruff House Rescue, Inc., a dog rescue non-profit organization, as a pro bono client. Ms. Witkin also serves as a member of The New York City Planned Giving Advisory Council of the American Cancer Society. 9
A refresher on Chapter 14 (relating to Code section 2704) • Let’s all remember: essentially all transfer tax valuations harken back to seminal rules of Rev. Rul. 59-60, 1959-1 C.B. 237 • Basically, fair market value is the price that a hypothetical willing buyer would pay a hypothetical willing seller, neither being under any compulsion to buy or sell • The gift tax regulations provide substantially the same rule at Reg. §25.2512-1 • Fast forward to the late 1980s: Code § 2036(c) and Estate of Harrison v. Commissioner , T.C. Memo 1987-8, 52 TCM 1306. • 2036(c) related to estate freezes and attempts to retain an income or other rights interest in an entity while transferring a “disproportionately large” share of the potential appreciation. Quickly recognized as being unworkable, and was repealed as part of PL 101-508, the Omnibus Budget Reconciliation Act of 1990, which enacted Chapter 14. 10
A refresher on Chapter 14 (relating to Code section 2704) • Estate of Harrison was particularly irksome to the Service: • This case involved a partnership that parent and two children controlled as the GPs. The parent also held all of the LP interests. The GPs could each liquidate at any time. • At death, parent’s GP interest essentially became a LP interest, because the estate of a deceased GP could not exercise the liquidation right. The liquidation right lapsed. • The value of parent’s LP interest was considerably less when held without the right to liquidate the partnership. • These types of lapsing rights were addressed by §2704(a) • Note that partnerships and corporations only were addressed-LLCs not mentioned 11
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