If it’s a flow-thru entity, then K1 with gains is recognized
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What happens to investors if an OZF sell its businesses or properties?
How could this impact individual investors who invested in the fund? Could situations like this disqualify investors from enjoying the tax benefits?
Answers
There are allowances for asset sales in the final regulations, but depending on the investors' respective holding periods, there could be adverse tax consequences for this. The main question is whether the investor has held the QOF equity for more than ten years. If yes, the investor should be OK. If not, the investor will pay taxes as normal.
The impact on the investors will depend on whether the fund is a partnership or not, the holding period, etc. If a partnership is less than 10 years, they will be taxed under normal rules.
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