Qualified Opportunity Zone Investment

Here are a couple of IRS references.

That is the investment company's rule. The law and the IRS do not make that restriction.

That's because it was created by the new tax law that was passed at the end of 2017 (the "TCJA").

It's not clear what your question is. You didn't actually ask a question.

Bob Sandler

Perhaps it should have been "have any members had a good experience with such an investment?" But, your comments were great, and much appreciated.

To my friend, I'll plan on saying we might find a company to do business with, but such an investment isn't my recommendation. It feels like letting a tax tail wag the investment dog. Again, thank-you.

According to JoeTaxpayer snipped-for-privacy@comcast.net:

There are multiple criteria for being an accredited investor, one of which is having $1M net worth other than your primary residence. If the $600K is 1/3 of her assets, $1.8M would make her accredited.

Having said that, doing a deal solely to avoid tax is invariably a bad idea. If the investment makes sense otherwise, she should consider it, and the tax advantage is an extra benefit. From what you've said it does not sound like tying up 1/3 of her retirement money for a decade in a single illiquid asset with uncertain prospects would be a good idea.

Just because a trust is irrevocable doesn't necessarily mean no step up in basis. These are several criteria for a trust being a grantor trust

- being irrevocable is one, but there are others as well.

I have seen lawyers who don't know what they are doing, see someone with money so they come up with something they think will justify them charging a large fee - even though they have no clue what it's all about. If that happened in this case, there may still be hope.

Not directly relevant, but I have a friend who was able to retire in his early 40's but to avoid taxes did some kind of 1031 exchange and ended up with all his assets in a single real estate property (an apartment complex). He had some sort of natural disaster and a dispute with the insurance company and to make a long story short, in his late 50's he ended up bankrupt. Don't let taxes wag the investment dog. (The story had a less-than-disasterous ending; he went back to school and got a certificate in data science and he's now in his early 60's and making $150K+stock working for a startup in Silicon Valley. Still, that's a lousy age to start saving for retirement.)

I searched a bit, having a decent idea of the use of one type of trust vs the other. For example, I had my MIL put everything into a revocable trust a few years before her passing. On her death, it was as simple as sending the broker a copy of the death certificate. A week or so later, I saw the basis adjusted to the data of death.

Also, I understand the irrevocable was popular back then, if only for the fact hat with a sub-$1M estate exemption ($600K in '98 IIRC) one wanted the gift to the trust to be a completed transaction to be used as the annual gift limit. I set up one for my daughter then, '98, to own the insurance policy and gifts, given the low exemption.

In this case, if you have anything else to share, I'd appreciate it. My searches didn't find anything to support the basis increase. As the numbers show, the difference, in April, can be quite a bit for this woman and her siblings.

"Grantor trusts" are defined by sections 671 through 679 of the Tax Code. You can find them here:

When a trust qualifies as a grantor trust, even if it is irrevocable it is treated, for income tax purposes, as if its owned by the grantor - its essentially ignored for income tax purposes.

Life insurance trusts are irrevocable grantor trusts, but the beneficiaries are considered the grantors. That's why they usually only have insurance policies and not other assets - they don't want to have any taxable income.

One particular kind of irrevocable grantor trust, that is used by the very wealthy, is called an "intentionally defective" trust. This is a trust that is irrevocable, but is considered to be a grantor trust. So the grantor can transfer property to his beneficiaries - and even sell property to his beneficiaries, without any income tax consequences. And the sale means it's not a gift, so there are no gift tax consequences either. So property is transferred from one generation to the next completely tax free.

But my specific point in your case is that this is a very complex area of the law, many lawyers don't know what they are doing, and that there is a chance (though probably small) that the lawyer who created your trust made a mistake that might have made it a grantor trust.