As the proposed regulations are digested by practitioners, here is some food for thought:
a. Will GRATs be underwater from the start - that is, nondiscounted values for the funding transactions, and discounted values for distributions back to the grantor?
b. Nondiscounted values required for sales to IDGTs?
c. Silver lining - assuming the higher Section 2704 values allow for higher basis for interests held at death, this will allow for income tax savings. For estates within annual exclusion amounts (and thus no estate tax) such basis step-ups could make this a revenue loser for the IRS.
d. For interests in corporations, perhaps the disregard of liquidation restrictions under state law are not going to fly, unlike in the partnership and LLC areas. If true, this may bring about more use of corporations for those with taxable estate situations.
e. How do the new valuation rules interface with swaps of assets between a grantor and his/her grantor trust?