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ARTICLE · 02 SEPTEMBER 2016

Valuation Discounts On Closely-Held Entities In Jeopardy

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Often, closely-held business owners will choose to transfer the business to younger family members during life or at death.

United StatesWealth Management
Frank L. Washelesky, CPA, JD, CVA, PFS
Frank L. Washelesky, CPA, JD, CVA, PFS
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Often, closely-held business owners will choose to transfer the business to younger family members during life or at death. The goal being to keep the business in the family. The Federal estate, gift and generation transfer tax rules can make these transactions difficult as taxes must be paid on the value of the business transferred.

To mitigate this problem, it has been common practice to reduce the value of partial interests in closely-held businesses and investment entities through valuation discounts. The two most common discounts are for lack of control over the entity and lack of a market for the interest being valued:

Discount for Lack of Control

(Minority Interest):

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