Is the individual taxpayer and/or investor you want to have listed inside of the Qualified Opportunity Zone Fund has experienced a capital gain? | OZPros

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Is the individual taxpayer and/or investor you want to have listed inside of the Qualified Opportunity Zone Fund has experienced a capital gain?

The eighth thing not to do with your Qualified Opportunity Zone Fund, is to not qualify the investor and/or correct taxpayer. You will want to determine who is the ultimate investor that’s going to be coming into your QOZF. Make sure the person who is making the investment into the QOF has personally experienced the capital gain. You also want to make sure the investor in the deal isn’t going to get it into an irrevocable trust. You also don’t want to convey it to a friend or a charity because any one of those events is going to trip an inclusion event, making it taxable. It’s okay to convey it to a grantor trust afterwards, but if you’re planning on doing any kind of estate planning, you want to make sure that you do that inside of your correct entity from the get go. To reiterate, make sure that the individual taxpayer you want to have listed inside of the Qualified Opportunity Fund is the one that experienced the gain and that you roll it over directly into that.

So if the partnership or Subchapter S corporation you had is the one that distributed the gain to you, and it came via a K1, make sure that it’s you individually that’s going to make the investment. If you are electing that, you want to make the rollover via the partnership, that the partnership itself wants to invest, because you want your investors to be able to continue on in this Opportunity Zone deal. Then, you’ll want to make sure the partnership itself is the investor into the Qualified Opportunity Zone Fund.

Now that you know what not to do, find out what to do by downloading your own version of the Opportunity Zone Cheat Sheet directly from our website. You can also schedule a Strategy Call or sign up for our OZPros Compliance Bootcamp today, so that we can help you learn how to do your Opportunity Zone deal correctly from the start.

MISSION CRITICAL #9