Has your business decreased in value? Take advantage!

Unless you’re hoping for a thank-you note from the IRS, take note.  A window of opportunity exists to use estate planning tactics which may not be available for much longer.

Several factors have come together:

1. The current economic climate has resulted in the reduced value of marketable securities, real estate and business interests. Clearly it’s less costly from a tax perspective to transfer property when its value is lower.
2. Interest rates are extremely low. IRS imposed minimum interest rates on notes for sales to family members have been very low for some months now. For March 2009, a note with a term of 9 years or less with annual payments requires a rate of only 1.94%. A note with a term of 3 years or less with annual payments requires a rate of just 0.72%. Now is an excellent time to execute a sale to family members.
3. A proposed tax bill, HR 436, contains a provision which eliminates valuation discounts for transfers of fractional interests in entities containing “non-business assets.” This is aimed at eliminating the use, for estate planning purposes, of investment partnerships (like family partnerships with marketable securities), real estate partnerships where the transferor does not meet the rules for “material participation,” and active businesses holding passive assets beyond reasonable working capital needs.

Planning now allows you to take advantage of these discounts before they disappear.

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