How do I self-certify to set up my own OZ fund and what are the costs involved?

Answers

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  Blake Christian

  HCVT CPAs

  May 10, 2019

  You file IRS Form 8996 with your return for the year of QOF formation/certification. Even though the form is not terribly complex I recommend that you get assistance from a CPA or attorney to ensure you pick the proper certification date, which must be on or before the date the QOF accepts funds from an investor rolling qualified gains. The cost of completing the form should be relatively nominal - say, an hour of time. However, the attorney or CPA will likely need some time to fully evaluate your specific project. Formation of your QOF and QOZB should be approximately the same as forming any other entity. Monitoring and semi-annual testing of the entities can range from simple to complex, so costs are tough to estimate.

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  Phil Jelsma

  Crosbie Gliner Schiffman Southard & Swanson (CGS3)

  May 10, 2019

  You complete the Form 8996 each year and certify that the QOF meets all of the requirements set forth in the regulations. I think it only makes sense to do your own fund if you have at least $100,000 to invest. The setup costs should be less than $5,000 and maintenance will depend on the cost of your tax return.

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  Brandon Jones

  Winstead

  May 10, 2019

  Have your CPA complete IRS Form 8996 and file with the funds first tax return.

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  June 28, 2019

  It makes sense with a minimum investment of about $500,000. Lower than that and the transaction costs have too much friction to make it worthwhile. Initial setup should cost about $3,000 to $5,000 in legal, $1,500 to $2,500 in accounting, and about $500 in other expenses. Compliance expenses should be about $2,500 yearly. Where the big costs would come in is the setup and ongoing legal structuring for the QOF's investments.

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  Brett Siglin

  Jennings Strouss & Salmon

  June 26, 2019

  It’s quite simple to self-certify. The ongoing legal costs and accounting costs vary, depending on a host of factors.

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  Joyce Soriano-McDowell

  Rise Equity

  June 26, 2019

  To self-certify the QOF, Form 8996 needs to be completed annually. There is no minimum amount of capital required to set up a QOF. However, legal and other setup costs vary, so I would suggest that you speak to several law firms and accounting firms that specialize in QOFs to determine costs.

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  Blake Christian

  HCVT CPAs

  June 27, 2019

  You use IRS Form 8996 to self-certify and also to semi-annually test the QOFs compliance. I generally recommend at least $500,000 of deferred gains from a taxpayer or small group of taxpayers to justify a personal OZ fund/QOF. Setup costs are dependent upon the complexity of the entity structure and operating agreements, but generally $2,000 to $3,000 per entity and $1,500 to $3,000 combined semi-annually testing. This is generally much less than the fees charged by "public" OZ funds.

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