What are the rules regarding whether a taxpayer can defer eligible gain by acquiring an equity interest in a QOF from a person other than a QOF?

Answers

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  Peter McNeil

  Comprehensive Financial Solutions and Tax

  May 20, 2019

  I have to start with a warning. This is an issue that is not addressed in either statute or regulations. Our preliminary analysis concludes the following: We are fairly sure that a purchase that does not come from a capital gain will receive no benefit. A secondary investment from capital gains should get benefits of deferral. The clock for determining when the 5-, 7- and 10-year step ups occur with the new purchase. A literal reading of section 1400Z-2 offers no differentiation between an original investment or a secondary investment in a fund.

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  Ronald Fieldstone

  Saul Ewing Arnstein & Lehr LLP

  May 21, 2019

  You can acquire interest in a QOZ fund or a QOZ business. Otherwise, it will not qualify.

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  May 23, 2019

  A taxpayer can get credit for any cash or property exchanged for a QOF interest, even if that QOF interest is bought from a current investor in the QOF. The newest round of regulations treats this no differently than a direct investment in the QOF itself, and all the same rules apply.

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