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

Entity vs. Partner Deferral Election, Allocation Rules, Basis Step-Up

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


Conducted on Thursday, August 29, 2019

Recorded event now available

or call 1-800-926-7926
Program Materials

This webinar will provide tax advisers with a practical guide to the qualified opportunity zone (QOZ) tax incentives made available under Section 1400Z as they impact partnerships. The panel will discuss the mechanics of Section 1400Z and the proposed regulations issued in October 2018, as well as address the special rules unique to partnership investments in qualified opportunity funds (QOF). They will discuss how to qualify for tax benefits by investing in a QOF, the requirements to create and maintain QOFs and QOZ businesses, and critical areas of the law that remain uncertain.

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.

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Outline

  1. Section 1400Z-2 opportunity zone provisions
  2. Processes and criteria designating QOZs
  3. Opportunity zone funds as the new class of investment vehicles and interests they can hold
  4. Specific tax incentives provided for in QOF investments
  5. Election flexibility for partnerships and other PTEs investing in QOFs
    1. Election at the entity level to defer
    2. Entity recognition of gain with election pushed down to partner/members
    3. Holding period and special rules when individual partners elect deferral
  6. Contrast QOF incentives with 1031 election results in a partnership context
  7. Filing and documentation requirements

Benefits

The panel will review these and other key issues:

  • What are QOZs and the eligibility requirements under IRC 1400Z?
  • What are QOFs and QOZ businesses?
  • How can taxpayers ensure the deferral or reduction of capital gains and the appreciation exclusion?
  • Recent IRS guidance on gain deferral and the "substantially all" requirement imposed on QOZ businesses
  • Specific IRS guidance on advantageous treatment of partnerships and other PTEs investing in QOFs

Faculty

Lentine, William
William C. Lentine

Partner
Warner Norcross + Judd

Mr. Lentine is experienced in corporate tax matters, partnership taxation, mergers & acquisitions and estate...  |  Read More

Shaver, Daren
Daren R. Shaver

Atty
Hanson Bridgett

Mr. Shaver is a transactional tax attorney, helping clients achieve their objectives in a practical and tax-efficient...  |  Read More

Sobochan, Dave
Dave Sobochan, CPA

Partner
Cohen & Company

Mr. Sobochan focuses on tax planning, reporting and minimization strategies, including entity, retirement and...  |  Read More

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