Managing the Exit Tax Burden of the QALICB


Reposted With Permission From Novogradac Journal of Tax Credits.

Part One of this article explained that when a new markets tax credit (NMTC) investor exercises a put option (the exit transaction) in a leveraged transaction at the end of the seven-year compliance period, it is possible that the qualifi ed active low-income community business (QALICB) will not recognize any cancellation of indebtedness (COD) income. Part One also explained that if COD income is recognized, the amount of income should be the difference between the issue price of the “B loan” and the fair market value of the B loan when the put is exercised.

The following example was used to illustrate these points...

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