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Treasury Notes

 Treasury Issues Proposed Regulations to Close Estate and Gift Tax Loophole

By: Mark J. Mazur
8/2/2016

Today, the U.S. Department of the Treasury announced a new regulatory proposal to close a tax loophole that certain taxpayers have long used to understate the fair market value of their assets for estate and gift tax purposes. 

Estate and gift taxes, or transfer taxes, are taxes on the transfer of assets from one person to another either by gift during his or her lifetime or by inheritance at death. Only transfers by an individual or their estate in excess of $5.45 million are subject to tax. For married couples, no tax is collected on the first $10.9 million transferred. These generous exemption amounts mean that fewer than 10,000 of the largest estates are subject to any transfer tax at all in a year.

It is common for wealthy taxpayers and their advisors to use certain aggressive tax planning tactics to artificially lower the taxable value of their transferred assets. By taking advantage of these tactics, certain taxpayers or their estates owning closely held businesses or other entities can end up paying less than they should in estate or gift taxes. Treasury’s action will significantly reduce the ability of these taxpayers and their estates to use such techniques solely for the purpose of lowering their estate and gift taxes. These proposed regulations are subject to a 90-day public comment period. The regulations themselves will not go into effect until the comments are carefully considered and then 30 days after the regulations are finalized.

​View the proposed regulations here​

Mark Mazur currently serves as the Assistant Secretary for Tax Policy at the U.S. Department of the Treasury.

Posted in:  Tax Policy
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