Qualified Opportunity Fund Partnership Investments Under 1400Z: Special Timing and Deferral Opportunities

Description

The new QOZ provisions found in Section 1400Z of the Internal Revenue Code represent perhaps the most significant economic development tax incentive program in several decades. Section 1400Z allows taxpayers to defer and reduce the tax on capital gains by enabling taxpayers to reinvest capital gain proceeds in a QOF. These funds are established to inject investment capital into designated low-income communities to promote economic growth.

Section 1400Z allows any taxpayer--individuals, C corporations (including REITs), trusts, S corporations, and partnerships--may elect to defer gain on sale of stock reinvested in a QOF. The rules provide particular advantages for partnerships and other pass-through entities (PTEs) investing in QOFs, allowing the entity to choose between deferring gain at the partnership/PTE level or passing gain through to its partners, who may individually elect deferral.

The ability to choose deferral at the PTE level or the member/partner level provides significant benefits to PTEs. Tax advisers to PTEs must be able to discern the potential tax impact of entity-level vs. individual owner deferral.

Listen as our panel discusses the benefits of the new QOZ tax incentive program as an investment tool for partnerships and other PTEs and strategies for achieving optimal capital gains tax deferral or reduction results for owner/members of PTEs.