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Qualified Opportunity Funds: Eligibility Requirements, Recent Regulations, Form 8996 Self-Certification

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Monday, July 1, 2019

Recorded event now available

This course will address the latest compliance challenges investors and tax practitioners are facing with qualified opportunity funds (QOFs). Existing guidance under Sections 1400Z-1 and 1400Z-2, Revenue Ruling 2018-29 and the regulations released Oct. 19, 2018 and April 17, 2019, explain the rules, answer some questions and create new ones. The panelists will provide guidance on the best procedures to fully utilize and preserve the tax incentives offered by investing in Opportunity Zones (OZs). They will cover ensuring your QOF is qualified, meeting the thresholds to avoid penalties, and key structuring and operational guidance.

Description

There are more than 8,700 designated OZs located in all 50 states and several U.S. territories. Investing in OZs generates basis step-ups along the way. Initially, the deferred gain is invested in a QOF with a basis of zero. If a QOF interest is held for five years, the basis in the QOF interest is increased to 10% of the gain postponed; if a QOF interest is held for seven years, this increases to 15%. Since all deferred gains are taxed Dec. 31, 2026, investors must act this year to get the 15% step-up.

Additionally, a QOF interest held for 10 years receives a basis step-up equal to fair market value, so no capital gains tax applies when an investor sells its QOF interest after 10 years. Taxpayers and tax practitioners alike are excited that there is a vehicle that eliminates capital gains on appreciation.

Amid all the excitement are compliance and structuring issues. Gain proceeds must be invested in a QOF and cannot be used to acquire property in an OZ directly. Sin businesses such as a golf course, racetrack or country club fail to qualify as eligible businesses. Additionally, a QOF must be a corporation or partnership, 90% of a QOF's assets must be invested in QOZ property, its use must begin with this business, and there are related party rules applicable to the acquisition of the property.

Listen as our panel of experts breaks down the complexities of the newly enacted SubChapter Z, provides clarification of recent regulations, and recommendations for implementing a QOF.

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Outline

  1. Tax incentives and investment timeline
  2. Investor requirements – eligible gain and reinvestment timing
  3. Qualifying as a QOF – the 90% asset test
  4. Qualified Opportunity Zone Businesses – real estate vs operating businesses
  5. Exit Structuring
  6. Opportunity Zone deals

Benefits

The panel will review these and other important issues:

  • Tax incentives offered by investing in OZs
  • QOF qualification requirements
  • Self-certifying a QOF
  • Interpreting recent guidance
  • Unsettled issues

Faculty

Adler, Terri
Terri L. Adler
Managing Partner
Duval & Stachenfeld

Ms. Adler is the Firm's Managing Partner, chair of the Firm’s Real Estate Department, and a member of the...  |  Read More

Millett, Jessica
Jessica Millett
Partner
Duval & Stachenfeld

Ms. Millett is chair of Duval & Stachenfeld’s Tax Practice Group. She has particular expertise in U.S. tax...  |  Read More