New IRS position on intrafamily stock transfers.Issue If a donor transfers shares of a corporation to each of his children, should corporate control in the family be considered in valuing each transferred interest for gift and estate tax purposes? Old IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. position Rev. Rul. 81-253 held that, ordinarily, no minority shareholder discount was allowed on transfers of shares of stock between family members if, based on the family members' interests at the time of the transfer, corporate control (either majority voting Majority voting Voting system under which corporate shareholders vote for each director separately. Related: Cumulative voting. majority voting control or de facto [Latin, In fact.] In fact, in deed, actually. This phrase is used to characterize an officer, a government, a past action, or a state of affairs that must be accepted for all practical purposes, but is illegal or illegitimate. control through family relationships) existed in the family unit. (See also the Tax Clinic item, "Valuing decedent's community interest in controlling stock," TTA TTA Telecommunications Technology Association (Korea) TTA Teacher Training Agency (UK) TTA Triangle Transit Authority (Raleigh/Chapel Hill/Durham, North Carolina, USA) , May 1982, at 299.) New position Rev. Rul. 93-12 now concludes that, for a corporation with a single class of stock, despite the family relationship of the donor, donee The recipient of a gift. An individual to whom a power of appointment is conveyed. donee n. a person or entity receiving an outright gift or donation. DONEE. and other shareholders, the other family members' shares will not be aggregated with the transferred shares in determining whether the transferred shares should be valued as part of a controlling interest controlling interest The ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail . This new position applies whether the donor held 100% or some lesser percentage of the stock immediately before the gift. Example: P owned all of the single outstanding class of X corporation's stock. P transferred all of his X shares by making simultaneous gifts of 20% of the shares to each of P's children, A, B, C, D. and E. The minority interests transferred to the children should be valued for gift tax purposes without regard to the parties' family relationship. |
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