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Tax Notes Quotes Beth Kaufman on Opportunity Zone Regs

January 24, 2020, Tax Notes

The final Opportunity Zone regs (T.D. 9889) released in December offered estate planners significant clarity on what is treated as an inclusion event that triggers the deferred tax on an investment in a qualified opportunity fund.

One such clarification is that transfers by a grantor to a grantor trust are not deemed an inclusion event, although a change in a trust from grantor to non-grantor status will trigger the deferred tax, Hughes noted.

. . .

The additional clarification is helpful, “but for estate planners, there are still traps for the unwary,” according to Beth Shapiro Kaufman of Caplin & Drysdale.

For example, when taking on a new client, estate planners must take extra care to ask the client if they have any QOF investments because “sometimes we suggest changing the title to things,” Kaufman said. Accidentally changing the title on a QOF investment “could be a really bad thing. . . . You could mess the whole thing up for them,” she said.

. . .

Another type of transaction — spousal transfers under section 1041, which are often done in the context of a divorce — are also treated as inclusion events, Hughes said.

“So beware if any of your clients have a qualifying investment, and they’re about to get a divorce order that orders them to retitle and divide a QOF [investment] between the divorcing spouses,” Hughes cautioned.

Failure to do so would just be “adding insult to injury,” Kaufman added.

For the full article, please visit Tax Notes’ website (subscription required).

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