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Scott Ditman on IRS Proposal Severely Curtaining Discounts in Estate Planning

Claude Solnik
10.21.2016 | Long Island Business News
In the article “All in the Family” Berdon tax partner Scott Ditman examined the IRS proposal severely curtailing discounts to family members in estate planning, effectively raising the cost on transferring businesses within a family.

“The proposals are facing opposition by tax practitioners, taxpayers and other advisors who argue that the IRS has overstepped its authority,” according to Scott Ditman, chair of personal wealth services at Berdon with Long Island operations in Jericho.

A public hearing is slated for December in what is likely to be a contentious showdown and a key factor in the future of family businesses.

While new regulations would affect all industries, Ditman said they “would have a particularly significant impact in the case of real estate business owners.”

He said “special considerations” can impact real estate, such as depreciating assets, refinancing mortgages and distributing additional money to the owners.

“With real estate, the income tax basis of the assets could be significantly lower than the market value,” Ditman said.

Since regulations haven’t been finalized, many people may not know about the debate. Ditman said those planning or interested in making family gifts and sales to reduce estate tax payable at death should “take action” now.

“Even if you are not currently planning a transaction, review your estate plan with your advisor in light of these proposed regulations,” he said.

Although IRS regulations can go into effect 30 days after they’re finalized, these, if and when passed, would most likely go into effect later. But it takes time to give a stake in a business.