In a Baker & McKenzie client alert, they point out that are Estate & Family planning opportunities amidst the economic environment created by the coronavirus pandemic.
On Wednesday, April 29th, 2020, the U.S. Bureau of Economic Analysis (BEA) released data showing that the United States economy shrank in Real GDP terms at a 4.8% annualized pace in the first quarter of 2020.
At the same time, the International Monetary Fund reported the Real GDP slide in the U.S. was even higher. In response to this economic decline, the U.S. federal reserve reduced its target federal funds interest rate on March 16th, with the benchmark U.S. Treasury 10-year bond hitting a record low yield on March 9th, 2020.
This has resulted in the IRS reducing the Applicable Federal Rate (AFR) to record lows. Now, while this might not be welcome news on a whole, it does present an opportunity for certain families to take advantage of the depressed current fair market valuations and record low interest rates from a U.S. gift and estate tax perspective.
More specifically it can affect:
- Definition of fair market value and timing of FMV assessment.
- Value of businesses for gift tax purposes.
- Interfamily sales and loans.
- Shareholder loans
- Grats
Read more at: Tax Times blog
