Managing the Exit Tax Burden of the QALICB

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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...

Please see full article below for more information.

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Published In: Finance & Banking Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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