Background

In December 2017, as part of the Tax Cuts and Jobs Act (“TCJA”), Congress established a new tax incentive program to promote investment in certain low-income communities designated by the IRS as qualified opportunity zones. Section 1400Z-2 of the Internal Revenue Code provides three compelling tax incentives to encourage investment in qualified opportunity funds (“QOFs”).

• Taxpayers can defer paying taxes on capital gain from the sale or exchange of appreciated assets by investing such gain in a QOF within 180 days following such sale or exchange. Such gain may be deferred until the earlier of (i) when the investment is sold or exchanged or (ii) December 31, 2026.
• Investors receive a step-up in the basis equal to 10% of the original deferred gain if the investment in the QOF is held for at least five years, with an additional 5% basis step-up if the investment is held for seven years. These basis step-ups can result in permanent exclusion from taxation of up to 15% of the originally deferred gain.
• If the investor holds the investment in the QOF for at least 10 years, an elective basis adjustment made upon sale of the interest in the QOF provides a permanent exclusion from taxation for any appreciation in excess of the deferred gain.

On April 17, 2019, the Treasury Department released its second round of guidance on opportunity zone investment in the form of proposed regulations (the “New Proposed Regulations”). These newly proposed regulations supplement and in some cases revise the proposed regulations issued in October 2018 (The “October Proposed Regulations”).
Continue Reading Opportunity Zones Update: NEW PROPOSED TREASURY REGULATIONS (PART I)

The Tax Cuts and Jobs Act created a new tax incentive program through investment in “qualified opportunity funds”. Qualified opportunity funds are intended to encourage investment in low-income communities by providing three tax incentives to investors:

• Investors can defer taxes on eligible capital gain arising from a sale or exchange of assets by investing in qualified opportunity funds.
•  10% of the deferred gain may be permanently excluded from federal income tax by way of a step-up in basis if an investor holds its interest in the qualified opportunity fund for at least five years, with an additional 5% basis step up if the investment is held for seven years.
• If the investor holds the investment in the qualified opportunity fund for at least 10 years, an elective basis adjustment made upon sale of the interest in the fund provides a permanent exclusion from taxation for any appreciation in excess of the originally deferred gain.

Continue Reading Opportunity Zones Update

In December 2017, as part of the Tax Cuts and Jobs Act, Congress created a new tool for community development in the form of tax incentives to invest in qualified opportunity zones through qualified opportunity zone funds under Section 1400Z-2 of the Internal Revenue Code.
Continue Reading Opportunity Zone Tax Incentives = Higher Investment Returns

The new tax bill passed by Congress and signed into law by the President today has increased the amount individuals can transfer free of Gift, Estate and Generation Skipping Transfer (“GST”) taxes.  The law now provides:

• Beginning in 2018, the Estate/Gift/GST tax exemptions are increased from $5,000,000 to $10,000,000, indexed for inflation (approximately $11,200,000 in 2018).
• The increased exemptions will expire on December 31, 2025 (i.e., the increased exemptions revert to the current $5 million exemption beginning on January 1, 2026, still indexed for inflation) unless Congress acts to extend them.  The US Department of Treasury and the IRS will prepare regulations to confirm that gifts made during this period up to the increased exemption amounts will not later be subject to tax if the exemptions are reduced.
• The 40% tax rate for Estate/Gift/GST tax remains the same.
• The annual Gift tax exclusion will still increase to $15,000 in 2018.
• The basis adjustment rules, which provide that the basis of any asset passing from a decedent at death will be adjusted to the fair market value of that asset as of the decedent’s date of death (i.e., a step up in basis), remain the same.

Continue Reading Tax Reform 101 – Estate Planning For High Net Worth Individuals

With the affirmative vote in the House today, both Houses of Congress have now passed a final version of the Tax Cuts and Jobs Act, clearing the legislation for President Trump’s signature. President Trump is widely expected to sign the legislation into law, although White House officials have now raised the prospect that the Act may not be signed until January. This significant legislation will impact nearly every sector of the U.S. economy and U.S. individual taxpayers in all income brackets.
Continue Reading Congress Passes Final Tax Reform Bill

On December 2, the Senate passed its version of the Tax Cuts and Jobs Act. The House of Representatives earlier approved a competing version of the Act on November 16. The Senate and House entered into conference this week to resolve differences between the two versions of the Act. The attached chart summarizes and compares key components of the two versions.
Continue Reading Tax Reform – The Current State of Play