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Can an EDC group be a member on a single asset LLC QOF?

If you are setting up a single asset QOF in the form of an LLC, can an EDC entity be a member of the QOF? How should the fund be structured?

  • Matthew Rappaport
    September 09, 2020

    The only reason not would be if the EDC is a straw member and it has no actual economic stake. Sometimes, EDCs are "token members" in LLCs simply to satisfy local rules or reserve governance rights over a development project. This token membership comes without any real share of cash or tax items. This might cause problems if the LLC only has one other member, in which case the IRS can allege the LLC is not a tax partnership and should not be eligible for QOF status.


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