“Accordingly, except as provided in these proposed regulations, transfers by gift will be inclusion events for purposes of section 1400Z-2(b)(1) and proposed §1.1400Z2(b)-1(c).”
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What do the new regulations say about which lifetime gratuitous transfers do or do not constitute “inclusion events”?
I am doing my estate planning and want to know what to think about when it comes to my Opportunity Zone investments.
Answers
According to the regulations, a gift generally constitutes an inclusion event, but a transfer to a grantor trust does not constitute an inclusion event.
Gifts are inclusion events. Transfers to grantor trusts are generally not inclusion events. There is some creative estate planning you can do with disregarded entities. Some estate planning strategies are available, and some will result in acceleration of the deferred capital gain. You need to consult a legal and/or tax advisor to sort this through.
Gifts of a QOF interest is an inclusion event that can trigger all or a portion of the deferred gain. Transfers to a grantor trust are exempted from triggering the gain. Basically you cannot shift the gain recognition (in 2016) and 10-year exemption to another taxpayer unless you transfer it upon death. Then the beneficiary will step into your shoes for future gain recognition and ultimate exemption.
Generally, a transfer by gift will be a triggering event. One exception is the transfer to a grantor trust.
A taxpayer's transfer of a qualifying investment in a QOF by gift, whether outright or in trust, is an inclusion event, regardless whether that transfer is a completed gift for federal gift tax purposes and regardless of the tax-exempt or taxable status of the donee.
There is great estate plan idea that superchargers the q zone benefits, if you properly hold the investment.
Gifts are inclusion events.
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