ARE YOU READY? (Federal Tax Changes Are Coming)

Since Q1 2020, Marshall & Stevens has been engaged for many more valuation engagements in support of wealth preservation strategies than in recent years.

The impetus for the increase in these types of assignments is the proposed federal tax changes.

Here is a list of strategies and how we are being engaged:

  1. Personal Tax – Increases in income tax and capital gains tax rates along with a significant reduction in the federal lifetime gift exemption limit have been proposed.   
    1. Wealth Transfer:  Valuations of fractional interests in businesses and real estate for gifting/transfer to trusts to preserve potential future gains for heirs and for gifting to charities.
    2. Sale: We are serving as advisors to clients looking to sell their businesses in the hope that they will be able to pay the current tax rate on sale proceeds.
    3. Recapitalization: We are performing Solvency Opinions for private equity investors who are initiating dividend recapitalization transactions, replacing equity in a business with inexpensive debt – essentially harvesting proceeds under the current tax rates.

  2. Corporate – Increases in corporate tax rates are expected and there is a proposal to terminate the federal bonus depreciation incentive in 2021. These potential changes are being countered with:
    1. Corporate Tax Restructurings – Selling assets from one entity to another entity in a lower tax jurisdiction or situation. We are valuing enterprises and assets. Sometimes Fairness Opinions are also requested.
    2. Investment in Renewable Energy Projects to shield earnings with investment tax credits (ITC), production tax credits (PTC), and depreciation benefits. We have a large Structured Finance practice dedicated to this work.
    3. Cost Segregation of commercial real estate and improvements to accelerate depreciation utilizing the IRS’s MACRS (Modified Accelerated Cost Recovery System) and the current federal bonus depreciation incentive. Cost Segregation has been popular for large and small real estate investors for decades. The federal bonus depreciation incentive is a cost segregation accelerant, allowing for the depreciation of all short-lived assets in the year they are acquired.
    4. Equipment Purchases and FinancingThe current federal bonus depreciation incentive provides for the depreciation of all acquired short-lived assets (life of 15 years or less) in Year 1 – essentially, buy it and expense it. And the assets being acquired do not have to be new, just new to you. 

IRS compliant valuation analyses play an important role in all these transactions. Established in 1932, Marshall & Stevens is a reliable and respected resource in valuations of businesses, tangible and intangible assets, and real estate for tax planning and reporting purposes. 

For more information, visit our website or reach out to one of our specialists or visit our website:

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