The IRS recently issued much-anticipated proposed regulations under Section 2704 of the Internal Revenue Code which, if finalized in their current form, would greatly limit the use of valuation discounts when transferring (during life or at death) interests in many types of family owned entities, thereby potentially undermining family partnership planning as a means to reducing the burden of the estate and gift tax. Many commentators had predicted that the regulations would make only modest changes, leaving discount planning essentially intact. Instead, it appears that the IRS has taken a very aggressive approach to reducing or eliminating valuation discounts in many contexts. The regulations, when promulgated in final form, will apply only to transfers occurring after the final regulations are published. A public hearing on the proposed regulations is scheduled for December. Thompson & Knight will be updating the blog in the days to follow with a more detailed analysis of the proposed regulations and their implications.