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Tag Archive for Blake Christian

Five Myths About The Opportunity Zone Program

Blake Christian Opportunity Zone Program

Due to the newness and uniqueness of the Opportunity Zone (OZ) Program and the voluminous OZ regulations, there is a fair amount of inaccurate information floating around in the business community.  Following is a non-exhaustive list of some of the more common misconceptions about this powerful federal tax program.  More details on the program can be found at https://www.hcvt.com/services-Federal-Qualified-Opportunity-Zone.html.

1) Only taxpayers with long-term capital gains can participate in the OZ Program.

False: Short-term capital gains and net §1231 (trade or business asset) gains, §1250 building depreciation recapture, capital gain dividend distributions, and a portion of certain “straddle” transactions can also qualify for Opportunity Zone (OZ) reinvestment. Unlike Internal Revenue Code (IRC) §1031 transactions, the OZ program can be used for real estate, tangible personal assets, bitcoin, art, collector cars, business sales, intangibles, and stocks.

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Is Your Business Still the Right Entity Under the New Tax Rule? Part 1

Blake Christian

What you need to know about corporations, partnerships and other structures under which you do business

Key Takeaways:

  • There are six widely used business operating structures. Each has pros and cons depending on the owner’s income and estate planning options.
  • Choosing the right legal form for your business is critical for both legal and tax purposes
  • The Tax Cuts and Jobs Act of 2017 (2017 Tax Act) made significant changes that should be factored into your entity choice.

As many of you know, The 2017 Tax Act made significant changes to the tax code. Most significantly individual tax rates have dropped and now cap out at 37 percent (vs. prior 39.6 percent). Here are some of the other highlights:

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Opportunity Zone Participation Window Expires June 28, 2019 For Those Who Want To Participate For 2018 Capital Gains

Blake Christian On Opportunity Zones

Taxpayers wishing to participate for any calendar 2018 capital gains must act quickly.

The Opportunity Zone (OZ) Program, ushered in as part of the 2017 Federal Tax Cut & Jobs Act, includes one of the most powerful and flexible tax planning provisions in decades.  The Program allows taxpayers who are generating capital gains from real estate sales, stock sales, artwork, Bitcoin, vehicles, intangibles and most other assets to roll over all or a portion of the gain into a Qualified Opportunity Fund (QOF) and achieve the following benefits:

  • Defer reporting the initial tax gain until December 2026.
  • Earn a 10% tax basis increase in their QOF investment in Year Five and another 5% increase in Year Seven – resulting in a permanent tax reduction.
  • Most importantly, gains accruing after the investment into the QOF will be 100% tax-free upon sale if the investment is held for at least 10 years.

The challenge for many is to roll those gains within 180 days from when the tax gain is reportable. As a result, action must be taken no later than June 28th, 2019 to participate in the OZ Program for any eligible calendar 2018 tax gains.

 Two important ways to participate while window of Opportunity is still open

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5 Ways To Leverage The Opportunity Zone Program – What You Will Be Happy To Learn About The OZ Program

Blake Christian On OZ Program

The Opportunity Zone (OZ) Program has been around for almost 18 months now but as a result of complexities and open issues on exactly how taxpayers would participate and benefit, the program is now getting national traction and investment dollars. The OZ Program is the most powerful investment and diversification and economic development tool I have seen in four decades of tax consulting.

The OZ Program borrows elements from other long-standing tax provisions –

-Internal Revenue Code Section(IRC) 1031(Like Kind Exchange) which allows taxpayers to defer taxes on properly structured real estate swaps,

-Roth 401K’s/IRAs which allow taxpayers to build-up tax-exempt income after holding the Roth Account for at least five years, and

-The Federal New Market Tax Credit Program

In summary, the OZ Program allows taxpayers to rol over all or a portion of capital gains (long or short-term) income into a Qualified Opportunity Fund (QOF). The invested funds can then be deployed into real estate or an active business located in one of the 8,700 qualifying census tracts throughout the U.S. and U.S. territories. Following these steps allows the taxpayer to defer the tax on their original capital gain until December 2026. Depending on when the taxpayer rolls their gain, they may also be eligible for a reduction in their reportable gain of 10% to 15%.

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Five Myths About The Opportunity Zone Program

Blake Christian Opportunity Zones

Due to the newness and uniqueness of the Opportunity Zone (OZ) Program and the voluminous OZ regulations, there is a fair amount of inaccurate information floating around in the business community.  Following is a non-exhaustive list of some of the more common misconceptions about this powerful federal tax program.  Note that June 28th is the deadline for setting up a Qualified Opportunity Fund (QOF) and investing cash or property from most calendar 2018 capital gains.  More details on the program can be found at:

https://www.hcvt.com/services-Federal-Qualified-Opportunity-Zone.html

  1. Only taxpayers with long-term capital gains can participate in the OZ Program.
  • False: Short-term capital gains and net §1231 (trade or business asset) gains, § 1250 building depreciation recapture, capital gain dividend distributions, and a portion of certain “straddle” transactions can also qualify for Opportunity Zone (OZ) reinvestment. Unlike Internal Revenue Code (IRC) §1031 transactions, the OZ program can be used for real estate, tangible personal assets, bitcoin, art, collector cars, business sales, intangibles and stocks.

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Over 8500 Tax Incentive Zones Throughout The U.S. Allow Employers To Claim Percentage Of Credits For Wages

Blake Christian - Tax Credits And Incentives
Hiring Tax Credits

An abundance of Federal and California hiring tax credits can offset your tax liability on a dollar-for-dollar basis.

Is your business potentially missing out on significant tax refunds which can offer you enhanced cash flow and a competitive advantage? Numerous federal and state tax hiring tax credits and incentives can offset your tax liability on a dollar-for-dollar basis. Any missed credits for past years can be secured via amended returns for at least the past three years, and to the extent the credits cannot be used in the prior or current year, liberal carryover rules generally apply. Federal and California hiring tax credits are abundant and should never be overlooked by those who have the potential to take advantage of them.

The significance of hiring tax credits is especially true for businesses when hiring employees. There are over 8,500 tax incentive zones throughout the country which generally allow employers to claim credits for a percentage of wages paid to employees meeting certain criteria at the time of hire. Which hiring tax credit and other incentive programs you qualify for.

Hiring Tax Credits Available to You

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The Federal Opportunity Zone Program – Overview

Blake Christian On Opportunity Zones

The 2017 Tax Cut and Jobs Act (2017 Act) created the federal Qualified Opportunity Zone program (QOZ or Program) effective in 2018 and operative up to the next three decades.

Beginning January 1, 2018, through December 31, 2026, individuals, corporations, REITs, and pass-through entities can sell their appreciated capital assets and elect to reinvest the resulting capital gain into a Qualified Opportunity Fund (QOF). The federal tax impact of participating in a QOF includes deferring qualified gains for up to eight years and permanently exempting up to 15% of the original federal gain and 100% of the post-reinvestment gain – after holding the investment for seven and ten years, respectively. State conformity to this law is varied and requires careful state-by-state analysis.

The Program offers a powerful and flexible tax savings and diversification tool for taxpayers generating capital gains. To participate, taxpayers must roll all (or a portion) of their capital gains (whether short-term or long-term) into a QOF. The QOF must then timely (180-day window discussed below) invest the gain into undeveloped or developed real estate, a new or existing QOZ-based business, or into other qualified QOZ property. While most of the focus is on real estate projects, the Program also provides significant potential benefits for taxpayers investing in active businesses that operate primarily within a QOZ. A future sale of an active business at multiples of 6- to 8-times EBITDA can easily eclipse a healthy real estate appreciation.

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The Federal Opportunity Zone Program Overview

Federal Opportunity Zone Program Overview By Blake Christian

The 2017 Tax Cut and Jobs Act (2017 Act) created the federal Qualified Opportunity Zone program (QOZ or Program) effective in 2018 and operative up to the next three decades.

Beginning January 1, 2018 through December 31, 2026, individuals, corporations, REITs, and pass-through entities can sell their appreciated capital assets and elect to reinvest the resulting capital gain into a Qualified Opportunity Fund (QOF). The federal tax impact of participating in a QOF includes deferring qualified gains for up to eight years and permanently exempting up to 15% of the original federal gain and 100% of the post-reinvestment gain – after holding the investment for seven and ten years, respectively. State conformity to this law is varied and requires a careful state-by-state analysis.

The Program offers a powerful and flexible tax savings and diversification tool for taxpayers generating capital gains. To participate, taxpayers must roll all (or a portion) of their capital gains (whether short-term or long-term) into a QOF. The QOF must then timely (180-day window discussed below) invest the gain into undeveloped or developed real estate, a new or existing QOZ-based business, or into other qualified QOZ property. While most of the focus is on real estate projects, the Program also provides significant potential benefits for taxpayers investing in active businesses that operate primarily within a QOZ. A future sale of an active business at multiples of 6- to 8-times EBITDA can easily eclipse a healthy real estate appreciation.

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Opportunity Zone Program – Federal Qualified Opportunity Zones

A Tax Deferral Tool

The 2017 Tax Cuts and Jobs Act (P.L. 115-97) introduced the Qualified Opportunity Zone (“QOZ”) program under I.R.C. Section 1400Z-1 and 1400Z-2. The QOZ program is an economic development platform intended to encourage private investment into low-income communities throughout the United States and U.S. territories and is generally effective January 1, 2018, through December 31, 2026.

Federal Tax Deferral

The QOZ gives taxpayers a federal tax deferral (as well as a potential partial permanent tax savings) of realized capital gains on the sale of appreciated assets. The taxpayer will still need to recognize the ordinary gain portion on the initial sale, but can effectively defer the portion of the gain subject to 20% or 23.8% capital gains tax, depending on the taxpayer’s specific facts and circumstance. For example, taxpayers will experience different marginal rates depending if the original investment was active, passive, or investment portfolio activity. Note that further guidance from the Internal Revenue Service (“IRS”) is required in this area.

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Top 10 Things You Need To Know About The Federal Opportunity Zone Program

Blake Christian - Top Ten Things You Need To Know

This post discusses the top ten things you need to know about the Federal Opportunity Zone Program.

1. Which Gains Are Eligible? – The Deferred Tax Gain can be related to a wide variety of capital assets sold by the investor, ranging from: the sale or disposition of land, developed real estate, stock or bond portfolios, artwork, collectibles, Bitcoin or other cryptocurrencies, as well as other tangible and intangible assets.  The Deferred Tax Gain must be reinvested into a Qualified Opportunity Zone Fund (QOF) within 180 days of recognizing the tax gain on sale (note there are beneficial timing rules for gains reportable from a partnership). Timely reinvestment will generally allow deferred gain reporting until the earlier of December 31, 2026, or the date the QOF is sold.

2. Qualified Opportunity Fund Requirement -Taxpayers wishing to participate in the QOZ program must do so through a QOF.  The statute provides a fairly straightforward process to meet the QOF requirements.  The entity must be either: i) a C Corporation, ii) an S Corporation or iii) a Partnership (including an LLC electing to be taxed as a partnership).  A QOF can represent a single investor or multiple investors.
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What Taxpayers Need To Know About Dividends, Interest And Capital Gains In The New Tax Landscape

Blake Christian
Key Takeaways
  • Regular dividends are generally not eligible for the lower long-term capital gains tax rates that Qualified Dividends receive unless the recipient holds the underlying shares for a specific period of time.
  • A common misconception is that the underlying shares must be held for longer than one year in order for any related dividends to be taxed as Qualified Dividends.
  • Since Real Estate Investment Trusts (REITs) generally pay no entity-level tax, dividends issued by a REIT are generally not eligible for the reduced rates assigned to Qualified Dividends.
  • Mutual fund distributions will only qualify for the reduced tax rate to the degree that the amount is determined to be a Qualified Dividend that’s received by the mutual fund.

Introduction
With the new 21 percent flat tax rate, along with liberalized asset depreciation and expensing provisions plus a lower tax on repatriated foreign earnings, the landmark Tax Cut and Jobs Act (TCJA) has been a boon to U.S. C corporations since its passage late last year. But, many individual taxpayers and their advisors are still digesting the changes and mulling over their next steps. Below is a primer about the tax treatment of dividends, interest and capital gains in light of the new tax reform landscape.

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The Federal Opportunity Zone Program – Overview

Blake Christian-Federal Opportunity Zone Program

The 2017 Tax Cut and Jobs Act (2017 Act) created the federal Qualified Opportunity Zone program (QOZ or Program) effective in 2018 and operative up to the next three decades.

Beginning January 1, 2018 through December 31, 2026, individuals, corporations, REITs, and pass-through entities can sell their appreciated capital assets and elect to reinvest the resulting capital gain into a Qualified Opportunity Fund (QOF). The federal tax impact of participating in a QOF includes deferring qualified gains for up to eight years and permanently exempting up to 15% of the original federal gain and 100% of the post-reinvestment gain – after holding the investment for seven and ten years, respectively. State conformity to this law is varied and requires a careful state-by-state analysis.

The Program offers a powerful and flexible tax savings and diversification tool for taxpayers generating capital gains. To participate, taxpayers must roll all (or a portion) of their capital gains (whether short-term or long-term) into a QOF. The QOF must then timely (180-day window discussed below) invest the gain into undeveloped or developed real estate, a new or existing QOZ-based business, or into other qualified QOZ property. While most of the focus is on real estate projects, the Program also provides significant potential benefits for taxpayers investing in active businesses that operate primarily within a QOZ. A future sale of an active business at multiples of 6- to 8-times EBITDA can easily eclipse a healthy real estate appreciation.

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