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Tag Archive for Opportunity Zones

Biden Administration Tax Reform Proposals 2023 Raises Your Taxes To 28% Corporate Rate And 39.6% Individual Rate!

Bidens Proposed Tax Increases

The Department of Treasury has published a 120 Page Report on General Explanations of the Biden Administration’s Fiscal Year 2023 Revenue Proposals. After reviewing this report it is apparent why so many wealthy individuals/families are turning to Opportunity Zones.

The Biden Administration wants to do the following:

Reform Business And International Taxation

  • Raise The Corporate Income Tax Rate To 28%
  • Adopt The Undertaxed Profits Rules
  • Provide Tax Incentives For Locating Jobs In U.S.
  • Remove Tax Deductions For Jobs Overseas
  • Prevent Basis Shifting By Related Parties Through Partnerships
  • Conform Definition Of Control With “Corporate Affiliation Test”
  • Expand Access To Retroactive Qualified Electing Fund Elections
  • Expand The Definition Of Foreign Business Entity To Include Taxable Units

Supporting Housing And Urban Development

  • Make Permanent The New Markets Tax Credit
  • Allow Selective Basis Boosts For Bond Financed Low Income Housing Credits Projects

Modify Fossil Fuel Taxation

  • Eliminate Fossil Fuel Tax Preferences
  • Modify Oil Spill Liability Trust Fund Financing And Super Fund Excise Taxes

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Cryptocurrency Investors Turn To Opportunity Zones For Tax Relief

Tax Exempt Opportunity Zones

Reposted Valuable Article From 2021 On Crypto Currency

Whether you consider cryptocurrency an investment, a commodity, an alternative banking system or a form of legalized gambling, the rapid adoption and stunning recent volatility of cryptocurrencies has led to frenetic trading by investors. As a result of COVID-19 disruption, economic uncertainty and the entry of PayPal into the crypto-consumer market (allowing more than 300 million users to buy cryptocurrencies easily), the crypto market has seen a dramatic runup in the values of Bitcoin and many other cryptocurrencies.

Speculative crypto trading (as well as day trading of stocks) has made many crypto investors wealthy on paper. Their trading generated a substantial amount of short-term capital gains. The IRS has made it clear that Bitcoin and other cryptocurrencies should be treated as assets or intangible property — and not currency — since it is not issued by a central bank. This results in taxability virtually every time crypto is transferred or liquidated.

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Learn How To Reinvest And Defer Capital Gains Through Opportunity Zones At Virtual Tax Summit (Session #7)

Do you have or do you have a client with a large capital gains issue?
Learn how to realize large capital gains with Opportunity Zones.

Long term and short term capital gains from stocks, collectibles, real estate, businesses, cryptos, etc. are eligible for OZ Reinvestment. Higher tax rates make knowledge and investment of OZ Program beneficial to tax advisors and their client investors.

Here is your complimentary ticket to TaxConnections Virtual Tax Summit and learn how to defer taxes through an OZ reinvestment in Session #7. Learn from leading expert on Opportunity Zones in the United States Blake Christian who is a highly sought after expert. Blake advises tax services firms and individuals who are experiencing large capital gains tax situations.

Attend this session to learn how this leading tax advisory expert on Opportunity Zones is helping tax advisors who have a client with a botched 1031 or other investments to reinvest into OZ assets or uncertain on replacement strategy.  If you want to be certain that your tax clients receive the best investment expertise available in the land of OZ, you will greatly benefit from this session on Opportunity Zones with Blake Christian.

REQUEST COMPLIMENTARY VIP TICKET TO VIRTUAL TAX SUMMIT

Saavy Taxpayers Transforming Business Gains Into Gold: Turning Net 1231 Gains Into Gross 1231 Gains (and Losses)

Saavy Taxpayers Transforming Business Gains Into Gold: Turning Net 1231 Gains Into Gross 1231 Gains (and Losses)

SAVVY TAXPAYERS ARE TRANSFORMING BUSINESS GAIN TAXATION LEAD INTO GOLD. THEIR APPROACH IS FAR FROM “ORDINARY”.

Key Takeaways

  • Treasury and IRS initially struggled regarding how to deal with IRC Section 1231 gains and losses in the context of the OZ program; however, the final OZ Regulations ended up being extremely taxpayer-friendly.
  • Understanding how and why Treasury arrived at its decision unlocks a remarkable, yet brief, planning opportunity for taxpayers and their advisors.
  • With the right planning, taxpayers can isolate gross 1231 gains for OZ reinvestment eligibility but still claim gross 1231 losses in the same year at ordinary income rates – resulting in permanent tax savings.
  • Taxpayers who already reported net 1231 gains in tax years 2019 and 2020 can still likely make tax-advantaged QOF investments for those years—but the window is closing fast – especially for 2019 1231 gains.
  • This ability to defer 1231 gain and recognize 1231 losses can further benefit certain taxpayers who would have otherwise been forced to pay ordinary rates on net 1231 gains in a given year as a result of the five-year “look-back” period under 1231(c).

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Opportunity Zone Legislative Update June 2021

Opportunity Zone Legislative Update June 2021

The Biden Administration is continuing to support the program. This comes as no surprise, considering the architects of the 2018 program came out of the Obama Administration. We do anticipate a few OZ program refinements this year, but no major overhaul. The legislative program updates we anticipate are summarized below, in Exhibit A. For the most part, these changes will be beneficial to investors.

Perhaps the most talked about topic in the tax world is President Biden’s proposal to increase the rates for long-term capital gains. If passed, the maximum rate could rise from 23.8% to 43.4% for taxpayers with over one million dollars of taxable income. There are doubts that Congress will increase the rate to that level, but any rate change may or may not survive until 2026, when the OZ deferred gains are generally reportable (based on the next administration). The risk of the rate increase for 2020 and 2021 deferred gains should be considered when deciding to defer, and we will be glad to discuss the long-term impact.

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IRS Notice 2021-10 Provides Additional Short-term Relief For Qualified Opportunity Fund Requirements

IRS Notice 2021-10 Provides Additional Short-term Relief For Qualified Opportunity Fund Requirements

As a result of the continuing COVID-19 impact on businesses and individuals the IRS released a second Notice (IRS Notice 2021-10) on January 19, 2021 to provide Opportunity Zone (OZ) investors with additional time to roll capital gains into a Qualified Opportunity Fund (QOF), as well as additional time to make “substantial improvements” to acquired property and additional time to acquire Qualified Opportunity Zone Business Property (QOZBP).  This Notice follows the June 2020 Notice 2020-39 which extended various 2019 and 2020 OZ Program deadlines and testing dates – generally through December 31st. The extended relief under 2021-10 is generally through March 31, 2021.

Details of the relief given by Notice 2021-10 are outlined below:

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IRS: Facts About Opportunity Zones

Opportunity Zones

The Tax Cuts and Jobs Act included changes for businesses and individuals. One of these is the creation of the Opportunity Zones tax incentive, an economic development tool that allows people to invest in distressed areas. This incentive’s purpose is to spur economic development and job creation in distressed communities
by providing tax benefits to investors. Low income communities and certain contiguous communities qualify as Opportunity Zones if a state, the District of Columbia or a U.S. territory nominated them for that designation and the U.S. Treasury certified that nomination. Following the nomination process, 8,764 communities in all 50
states, the District of Columbia and five U.S. territories were certified as Qualified Opportunity Zones (QOZs). Congress later designated each low-income community in Puerto Rico as a QOZ effective Dec. 22, 2017. The list of each QOZ can be found in IRS Notices 2018-48 and 2019-42. Further, a visual map of the census tracts designated as QOZs may be found at Opportunity Zones Resources.

Benefits Of Investing In Opportunity Zones

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Relief For Qualified Opportunity Funds And Investors

BLAKE CHRISTIAN: Relief For Qualified Opportunity Funds And Investors

Relief for Qualified Opportunity Funds and Investors Affected by Ongoing Coronavirus Disease 2019 Pandemic

The key components of Notice 2020-39 (issued 6/04/2020) are listed below:

This notice extends the termination date of the 180-day reinvestment period. The termination of the 180-day reinvestment period would otherwise end between April 1, 2020, and December 31, 2020, will now have until December 31 to fund the Qualified Opportunity Fund (QOF). The prior COVID extension was July 15, under Notice 2020-23.
There are significant 2019/2020 long-term tax planning opportunities and a unique situation where a taxpayer might file a return (current extended due date – October 15) before funding their QOF. Amended returns will be allowed if the taxpayer had not estimated the funding amount before filing their return.

This extension will avoid complications associated with the early adoption of the Final Regulations for taxpayers with pre-March 15th, 2020 gains.
The 30-month “Substantial Improvement” test (i.e., doubling of basis) is extended to at least 39 months (the regular April – December 2020 period is essentially frozen). Additional COVID-related extensions may also be available under the Opportunity Zone (OZ) Regulations.

Failure to meet the 90% qualified asset test at the QOF level during any testing period falling in the April 1 – December 31, 2020 period is effectively ignored although IRS Form 8996 must still be completed and filed.
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The Opportunity Zone Program – Ideal For Entrepreneurs

While the first set of Treasury Regulations and initial OZ statute primarily emphasized real estate projects as re-investment options, the final regulations clarified that operating businesses are also appropriate reinvestments for deferred gains. Unsurprisingly, most of the early Qualified Opportunity Funds (QOFs) focused entirely on real estate projects. However, once regulations had been finalized, investors and advisors have grasped the full flexibility and power of the OZ program. Additionally, private investors, PE firms and VC firms have come to realize that using the OZ program for operating businesses may yield even more substantial long-term benefits than real estate investments -- for investors as well as OZ communities.

While the first set of Treasury Regulations and initial OZ statute primarily emphasized real estate projects as re-investment options, the final regulations clarified that operating businesses are also appropriate reinvestments for deferred gains.

Unsurprisingly, most of the early Qualified Opportunity Funds (QOFs) focused entirely on real estate projects. However, once regulations had been finalized, investors and advisors have grasped the full flexibility and power of the OZ program. Additionally, private investors, PE firms and VC firms have come to realize that using the OZ program for operating businesses may yield even more substantial long-term benefits than real estate investments — for investors as well as OZ communities.

SINGIFICANT OZ BENEFITS FOR ACTIVE BUSINESSES

Both the Trump Administration and QOF architects view the use of the OZ program as a valuable tax and economic development tool for operating businesses for the following reasons:
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IRS Provides Answers About Tax Relief For Qualified Opportunity Funds And Investors

IRS Provides Answers About Tax Relief For Qualified Opportunity Funds And Investors

The Internal Revenue Service today provided guidance for Qualified Opportunity Funds (QOFs) and their investors in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic.

Notice 2020-39 (PDF) answers questions regarding relief from certain requirements under section 1400Z-2 of the Internal Revenue Code (Code) and the implementing regulations. Additionally, the IRS has updated the Qualified Opportunity Zones frequently asked questions.

Taxpayers who sold property for an eligible gain and who would have had 180 days to invest in a QOF to defer that gain, may have additional time. Notice 2020-39 provides that if a taxpayer’s 180th day to invest in a QOF would have fallen on or after April 1, 2020, and before December 31, 2020, the taxpayer now has until December 31, 2020 to invest that gain into a QOF. (The 180th day for some of these taxpayers was already postponed through July 15, 2020, under Notice 2020-23.) In addition, the notice provides that the period between April 1, 2020, and December 31, 2020, is suspended for purposes of the 30-month period during which property may be substantially improved.
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PDF COVID-19 Impact On Opportunity Zone Program Deadlines

BLAKE CHRISTIAN : Opportunity Zones Deadlines

The IRS issued Notices 2020-18, 2020-20, and 2020-23 (“Notices” or “Notice”) in response to the COVID-19 crisis and CARES Act. These Notices are intended to provide some needed guidance, extended filing and compliance deadlines, and cash-flow relief to taxpayers struggling with this current economic environment. The following is a quick summary of these Notices and how Opportunity Zone investors may be able to benefit from:

-an extended window for investing their capital gains into a Qualified Opportunity Fund (QOF),
-an additional 24-month Federal Disaster extension of the standard 31-month working capital safe harbor and the “substantial improvement” period for a tangible property (if included in the —–written business plan), and an extension of time to deploy Qualified Opportunity Zone Business (QOZB) funds into QOZB Property (QOZBP).

Notice 2020-18
-Postpones the due date from April 15, 2020, until July 15, 2020, for filing the vast majority of federal income tax returns and making Federal income tax payments otherwise due April 15, 2020.

Notice 2020-20
Provides additional relief by postponing specific Federal gift (and generation-skipping transfer) tax return filings and payments. Read more

Opportunity Zone Investing In The Covid-19 ERA

Opportunity Zone Investing In The Covid-19 ERA

Q1. The government has tried to help millions of taxpayers and small businesses during the Covid-19 crisis. Do you think Opportunity Zone (OZ) investors and funds will receive any relief?

BLAKE CHRISTIAN: Actually, the final OZ regulations provided extremely liberal rules regarding when the 180-day reinvestment for funding a Qualified Opportunity Fund (QOF) period starts. In the fairly common situation in which a gain is flowing through to a taxpayer on a schedule K-1 from a partnership, S Corp or a trust, the reinvestment period for calendar 2019 capital gains begins on March 15th and runs through September 10th, 2020, provided the taxpayer elects an early application of the final regulations.

Q2. Why hasn’t the IRS done more?

BC: Actually, it did. In early April, the IRS issued Revenue Procedure 2020-23, which provides a sliver of an extension for investors who had a direct capital gain in the last quarter of 2019 (that did not flow through on a K-1). If a normal 180-day reinvestment period was set to expire between April 1, 2020 and July 14, 2020, the Revenue Procedure extends the deadline until July 15, 2020 – a small crumb for a handful of OZ investors. Various OZ trade groups are continuing to push for a longer extension.
Once the OZ Funds are dropped down into the QOZB subsidiary, the investors receive a minimum of 31 months, and as long as 62 months to, acquire Qualified Opportunity Zone Business Property (QOZBP). The regulations also provide for the possibility of an additional 24 months when there is a national disaster declared in the taxpayer’s business location.
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