If you plan to transfer business interests — whether to family members, trusts, or other individuals or entities — understanding how your business is valued will change your approach to estate and gift tax liability. Two key valuation discounts, the Discount for Lack of Marketability (DLOM) and the Discount for Lack of Control (DLOC), can help business owners strategically transfer wealth while minimizing tax liabilities. WHAT IS THE DISCOUNT FOR LACK OF MARKETABILITY? DLOM applies when an ownership interest in a business cannot be easily sold or converted to cash. Unlike publicly traded stocks, privately held businesses lack an active market, making them less attractive to potential buyers. Because of this limited liquidity, the IRS allows for a reduction in the valuation of these interests when calculating estate and gift taxes in certain situations (with limitations). Business owners who plan to transfer interests in a privately held company can use DLOM to reduce the taxable value of their business assets, potentially saving significant amounts in estate taxes. WHAT IS THE DISCOUNT FOR LACK OF CONTROL? DLOC reflects the reduced value of an ownership interest that does not include controlling authority over a business. Minority shareholders (49% ownership or less), for example, may be unable to influence key decisions such as distributions, company sales, or leadership changes. This lack of control makes the ownership interest less valuable compared to a controlling stake, and the IRS recognizes this diminished value through a valuation discount. Business owners structuring ownership transfers within family partnerships, limited liability companies, or trusts often use DLOC to further reduce estate tax liability and manage succession planning efficiently. HOW DO THESE IMPACT YOUR ESTATE PLAN? Properly applying these valuation discounts can lead to substantial tax savings when transferring business interests to heirs or trusts. Without these adjustments, business owners can face inflated estate tax obligations that could force heirs to sell company assets to cover tax liabilities. Additionally, DLOM and DLOC can provide a strategic advantage when structuring family business succession plans. EFFECTIVE ESTATE PLANNING SOLUTIONS FOR CALIFORNIA BUSINESS OWNERS. Ensuring your plan is structured correctly is essential to maintaining control and preserving wealth across generations. Contact Dahl Law Group today at our offices in Sacramento and San Diego to discuss estate planning solutions tailored to your business and financial goals. What Are the Discounts for Lack of Marketability and Control And How Does It Help Estate Planning?
Did You Know? Did you know Father’s Day became an official U.S. holiday in 1972, long after Mother’s Day? And while ties remain a classic gift, surveys say tech gadgets and “a day off” top most dads’ wish lists these days.
Now, in true dad fashion, here are three great dad jokes!
Why don’t eggs tell jokes? Because they’d crack each other up.
What did the ocean say to the beach? Nothing, it just waved.
Want to hear a construction joke? I’m still working on it.
Here’s to the kings of corny humor and
unexpected trivia — thanks for keeping life fun. Happy Father’s Day!
Do you have a friend who needs our help? When you’re done reading, give them this newsletter and recommend they scan our QR code. We can help them solve their tax, business, or estate planning problems before things get worse.
2 tqdlaw.com | 916-545-2790
Made with FlippingBook Ebook Creator