Treasury to Withdraw Proposed IRS Regulation on Valuation Discounts

On October 2, 2017, the Department of the Treasury issued its Second Report to the President on Identifying and Reducing Tax Regulatory Burdens in response to Executive Order 13789, in which President Trump directed Treasury to "identify significant tax regulations issued on or after January 1, 2016, that (i) impose an undue financial burden on U.S. taxpayers, (ii) add undue complexity to the Federal tax laws, or (iii) exceed the statutory authority of the Internal Revenue Service."  In its report, Treasury announced its intention to withdraw in its entirety an August 2016 IRS proposed regulation under section 2704 of the Internal Revenue Code that would have eliminated or greatly restricted valuation discounts for transfers of interests between family members in family-controlled entities.  The valuation discounts are used by tax practitioners to reflect the fair market value of such property transfers and are a significant component of estate tax planning for many automobile dealers.  Treasury's decision to withdraw the proposed valuation discounts regulation in its entirety was advocated by NADA in both written and oral testimony to the IRS in late 2016.