H.R. 436 Estate Tax Relief Act of 2009 - Status Report

Purpose: To amend the Internal Revenue Code of 1986 to repeal the new carryover basis rules in order to prevent tax increases and the imposition of compliance burdens on many more estates than would benefit from repeal, to retain the estate tax with a $3,500,000 exemption, and for other purposes.

Status: Pending

Whether H.R. 436 will pass or not, either in its current or some revised form, is presently uncertain and aspects of this pending legislation that affect valuation discounting should be of concern to all who may be considering taking advantage of these benefits as they relate to family transfers of closely-held entity interests. The Bill, in its current condition, does not allow for the typical minority interest discounts, such as DLOC (Discount for Lack of Control) and DLOM (Discount for Lack of Marketability), on assets that are not actively used in a trade or business, essentially non-operating assets. This facet of the Bill essentially does away with discounts for FLPs (Family
Limited Partnerships) and for non-operating assets that are either non-essential or are not of an integral use in the conduct of a trade or business. Examples of exceptions to the non-operating assets clause would most likely include accounts receivable, inventories, real property actively used in a trade or business and other assets that
contribute to an entity's working capital needs. The proposed Bill targets FLPs but can also affect family owned closely-held businesses and the Bill, if passed in its current state, seeks to disallow the typical minority oriented discounts on investment assets and properties of closely-held entities. In light of the pending status of this legislation, please do not be remiss in addressing this matter with your clientele because, if passed, clients will probably want to know why you did not previously advise them of the issues concerned. Valuation reporting and application of appropriate discounts is our forte, so please feel welcome to call and refer.

Edward Heben, CPA/ABV/CFF, CVA, AEP - Partner
Citrin Cooperman & Company, LLP
709 Westchester Avenue, White Plains, NY USA 10604
P 914.949.2990 x356 l F 914.946.5399 | C 914.925.1120

Email: eheben@citrincooperman.com
Website: www.citrincooperman.com

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