1. IPED 101 – TAX CREDIT BASICS CAPITAL ACCOUNTS 704(b) & MINIMUM GAIN

2. IPED 101 – TAX CREDIT BASICS CAPITAL ACCOUNTS Increases to partners capital accounts –Cash contributed –Fair market value of property contributed Net of liabilities assumed by partnership –Allocations of income or gain Decreases to partners capital accounts –Cash distributed –Fair market value of property distributed Net of liabilities assumed by partnership –Allocations of loss or deduction, most credits

3. IPED 101 – TAX CREDIT BASICS DeveloperInvestor Partnership Agreement TAX CREDIT S Capital Account Limited Partnership

4. IPED 101 – TAX CREDIT BASICS DeveloperInvestor Capital Account Limited Partnership

5. IPED 101 – TAX CREDIT BASICS DeveloperInvestor Capital Account Limited Partnership 704(b)!!! Does not receive credits or losses Cannot use credits or losses Must pay an adjuster to the Investor 704(b) Issues

6. IPED 101 – TAX CREDIT BASICS Minimum Gain What is it? –Assumed sale of asset at year end –Assumed sale price of non-recourse debt plus $1 –Gain is calculated Assumed Sale price less Net Book Value How does it help a 704(b) problem? –Assumed Minimum Gain is allocated to partners –Losses can continue to flow to partners with negative capital accounts –Credits flow to the investor partner

7. IPED 101 – TAX CREDIT BASICS LIMITED PARTNER IRC 704(b) REALLOCATION

8. IPED 101 – TAX CREDIT BASICS Find FREE tax credit resources at: www.taxcredithousing.com E-mail us at Dan.smith@novoco.com Questions???