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Estate Planning Strategy May Be Targeted by the IRS

  Michael K. Menerey, Partner, CFO Edge, LLC  
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  Article Summary  
Given U.S. population trends around the large number of boomers turning 65 years of age every day, many greater Los Angeles and Southern California entrepreneurs and business owners are approaching the exit of their companies.

We addressed this topic in our earlier article, 10,000 Boomers a Day Hit 65: What This Means for Exit Planning, and owners in this position should be aware that estate planning strategy may be targeted by the IRS in the near term.

Especially important to business owners for whom proceeds from the sales of their businesses will contribute to their retirements, the IRS is considering changing the way estate assets are valued. More specifically, there could be far-reaching changes in the way certain assets have been valued below fair market value due to their lack of marketability - or discount for lack of marketability (DLOM).

Reviewed in this article are potential 'discount for lack of marketability' asset valuation changes and the impact on estate planning for owners selling their businesses.

By history, benefits from DLOM valuations have been successfully derived for assets that have included operating businesses, and, while the current IRS focus is on DLOM valuation of marketable securities, some experts are noting that the changes could be extended to other assets that may include privately-held businesses.

Executives considering sales of their businesses should consult with their tax and estate planning advisors to inquire about how these changes could impact their situations.

As CFO services professionals, we have deep expertise in helping owners address their exit plans and can provide support to you in this regard. You may be interested in our complimentary white paper that addresses exit planning in detail:

Planning a Business Exit

Fifteen white paper sections address exit methods, the importance of planning early, valuing the business, advisors and their roles, transaction negotiation, and much more.

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