IRS proposed estate tax regulations opposed by CPAs
Wealthy California residents and those who own family businesses are not likely to be in favor of proposed IRS regulations that would change the way estate taxes are calculated by significantly limiting asset discounts. When the proposed rule changes were announced in August 2016, the IRS said that they were being introduced to close a loophole commonly exploited by wealthy individuals in order to avoid paying estate taxes. However, an accountant speaking on behalf of the American Institute of CPAs said that the new regulations would be unworkable in practice and create confusion in the courts if implemented.
During an IRS hearing that had been scheduled to discuss the proposed estate tax rule changes, 35 of the 36 estate planning attorneys, accountants, business owners and appraisers who spoke were against the regulatory changes. While the IRS did not back down in the face of this criticism, statements made by a representative of the federal agency indicated that the wording of the pending regulations would likely be clarified.
Critics of the rule changes believe that the IRS is seeking to eliminate asset discounts entirely, but the agency claims that this is not the case. According to the IRS, the rules are only designed to prevent individuals from understating the value of their assets to avoid gift and estate taxes. Some analysts feel that the debate over the proposed regulations has been rendered moot by the presidential election. This is because simplifying the tax code was a major part of President-elect Donald Trump's campaign platform.
IRS regulations are revised from time to time, and attorneys with experience in this area may encourage their clients to revisit their estate plans regularly in light of these changes to ensure that they still meet their goals. Attorneys could also explain how certain types of trusts may be incorporated into estate plans to reduce estate tax liability.