I was honored last night to be sworn in as the President of the First Family Law American Inns of Court in Miami by the Hon. Reemberto Diaz, circuit judge. There was also a discussion on equitable distribution of business interests.
The American Inns of Court is an association of lawyers, judges, and other professionals from all levels and backgrounds who share a passion for professional excellence.
Our Inn was founded 20-years ago by the Hon. Richard Yale Feder, circuit judge. Judge Feder was not only a founder of our Inn, he was the primary motivator behind establishing the Family Division Courthouse in Miami-Dade County, Florida.
Last night’s presentation was not only a humorous look at family law statistics nationwide, but a cutting edge presentation on the new I.R.S. regulations impacting business valuations in matrimonial cases by Philip J. Shechter, CPA/ABV, CVA from Cherry Bekaert LLP.
I’ve written about equitable distribution before. Business valuations in divorces usually contain discounts. The two primary discounts are:
– discounts for a lack of control or a minority interest discount, and
– discounts for lack of marketability.
Initially the IRS stated that discounts were not available when valuing an interest in an entity that was controlled by family members. Discounts have become very popular in business valuations, and because of the increase in use if discounts the IRS has tried to limit claimed abuses and loopholes.
Section 2704 states that the Secretary of the Treasury may provide in regulations new restrictions that are to be disregarded in determining the value to a family member if the restriction reduces the value for estate tax purpose but does not ultimately reduce the value of the interest to the transferee.
The proposed regulations to section 2704 severely restrict the ability to use discounts in cases of family ownership. It anticipates work arounds, such as having a small portion of ownership in non-family members and prohibits using discounts in those situations too.
The new regulations could go into effect before year-end 2016.
A copy of the new regulations is here.