Some Food for Thought – Code Section 2704 Proposed Regulations

As the proposed regulations are digested by practitioners, here is some food for thought:

a. Will GRATs be underwater from the start – that is, nondiscounted values for the funding transactions, and discounted values for distributions back to the grantor?

b. Nondiscounted values required for sales to IDGTs?

c. Silver lining – assuming the higher Section 2704 values allow for higher basis for interests held at death, this will allow for income tax savings. For estates within annual exclusion amounts (and thus no estate tax) such basis step-ups could make this a revenue loser for the IRS.

d. For interests in corporations . . .

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