Estate Tax Valuation Discounts refer to reductions in the assessed value of an estate for tax purposes that arise from various factors affecting the marketability or control of the assets within the estate.
These discounts can include:
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Lack of Marketability Discount (LMD): This discount is applied to illiquid assets that cannot be easily sold or converted into cash. For example, if a family-owned business is included in the estate, its value may be reduced because there is no ready market for selling shares.
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Minority Interest Discount: This discount applies to situations where the decedent owned a minority stake in a business. The reasoning is that a minority owner typically has limited control and influence, which can diminish the asset’s value compared to a controlling interest.
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Blockage Discount: This discount applies when a large block of stock or other assets is held within an estate, which may not sell at the same price as smaller quantities due to market impact.
Overall, these discounts can significantly lower the taxable value of the estate, reducing the estate tax liability owed to the government. Proper application and justification of these discounts are crucial for compliance with tax regulations.
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