Note Valuations to the Fore in 2024?Note Valuations to the Fore in 2024?

Has your client ever received an audit notice on the valuation of a promissory note? If yes, the initial Internal Revenue Service position may often be paraphrased as: “Unless the borrower is insolvent and the note has inadequate collateral, the note value is its face value.” But what if the interest rate is inadequate? Would a willing buyer pay full face value for such a note? 

High-net-worth (HNW) families often structure promissory notes for trust transfers or to provide for the investments or spending by the younger generation with the capital of the older generation. These notes have accumulated in many trusts and estates, particularly during the past several years of very low interest rates. But what to do with them now, when planni...