The proposed Section 2704 regs still kicking around Washington would have a particularly bad effect on franchises, according to an article in Multi-Unit Franchisee.
Supersized impact: At the December 1 public hearing at the IRS, there were several speakers from the franchise world, including Keith Miller, a Subway franchisee and chair of the Coalition of Franchisee Associations (CFA), and Rob Branca, a Dunkin' Donuts franchisee and vice chair of the CFA. The CFA represents 41,000 franchisees at 86,000 locations employing about 1.4 million people. Miller points out that franchises operate under extremely restrictive rules set forth in the franchise agreement. For example, not all franchises automatically renew, so their value “goes down every day,” he said. Also, there are many restrictions on the sales of franchises. To ignore these restrictions, as the proposed regs would require, would hit franchises especially hard.
For more information, BVR has a special report, “Proposed IRC Section 2704: Potential Impacts on Estate and Gift Valuations.” This report includes updates covering the December 1 public hearing and any other developments on the proposed regulations.
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