<table><tr><th>From:</th><th>jeffrey E. &lt;jeevacation@gmail.com&gt;</th></tr><tr><td>Sent:</td><td>Friday, September 16, 2016 8:11 PM</td></tr><tr><td>To:</td><td>William Blum</td></tr><tr><td>Subject:</td><td>Re: FW: Capital Gain provision/PR Act 22 equivalent</td></tr></table>

you are right. let me think?

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On Fri, Sep 16, 20=6 at 4:04 PM, William Blue wrote:

OK. From a federal perspective any property that you owned when =ou arrived could be made free of capital gains taxes by the VI once ten ye=rs has passed. Do you have unrealized gains in such property? =ow long have you owned it? What about other property?<=span>

We need to come up with a method that could =ttract new residents but does not overly benefit existing residents or it =ill be attacked as harming revenues instead of enhancing them. So we=have to come up with a way to narrow benefits for existing residents.</=>

Bill

William Blum |=Partner

SOLOMON BLUM HEYMANN LLP =AO =C2 =A0 New York, NY 10005

Tel

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Email =C2

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From:=span style="font-size:10.0pt;font-family:"Tahoma","sans-s=rif"""> jeffrey E. [mailto:jeevacation@gmail.com <mailto:jeevacation@gmail.com> ]
Sent: Friday, Septemb=r 16, 2016 4:00 PM
To: William Blum

Subject: Re: FW: C=pital Gain provision/PR Act 22 equivalent

im a res=dent for 18 years. maybe its how the proerty becomes territory prope=ty after 10 years? , ill think about it over the weekend

=p class="MsoNormal">On Fri, Sep 16, 2016 at 3:05 PM, William Blum <████████████████████████
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SOLOMON BLUM HEYMANN LLP     =C2     =A0
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New York, N= 10005

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From:
Sent: Wednesday, September 14, 2016 2:53 PM jeffrey E. (jeevacation@gmail.com <mailto:jeevacation@gmail.com> )
Cc: Erika Kellerhals
Subjec=: Capital Gain provision/PR Act 22 equivalent

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Dear Jeff –

In thinking about how to draft these=provisions, I note that the PR Act 22 only applies to individuals who relo=ate to Puerto Rico who have not resided there during the 6 years preceding=relocation. Clearly, this is designed to be consistent with the stat=d purpose of Act 22 to encourage individuals to relocate to Puerto Rico, w=o would then presumably pay tax there and stimulate the local economy, whi=e preventing current residents from getting a "windfall".<=>

I am assuming that you would want to benefit from this law pers=nally and that you may have some unrealized capital gains. So I need=to find a way to draft around this issue — i.e., to figure out a w=y that you (and perhaps limited others) could benefit from this without op=ning the floodgates and actually costing the VI revenue.

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In th=s regard, please give me some facts that might distinguish you from others=that might benefit from this but that would accommodate the fact that you =ave been a USVI resident. In that regard, when did your USVI residen=t' start?

<= class="MsoNormal">A couple of ideas I had in this regard would be to pe=haps allow a partial capital gains exemption (say a rate of 10% instead of=20%) for an individual who is currently a resident but who sells securitie= with unrealized appreciation during a limited period, say a year, from th= date of enactment, regardless of when they took up residency. This =an be sold on the basis of an immediate one time cash infusion to help bal=nce the budget now.

<=>

Another idea is a flat across the board re=uction in the capital gains rate without "date of residency acquis=tion" restrictions. We couldn't realistically go to zero, =ut how about 15% for short term and 7.5% for long term — something=like that? Another idea is that this be restricted to individuals wh= otherwise pay, or will pay, very substantial taxes to the USVI — =ay at least $500,000 annually for each of the last x number of years. =AO Just brainstorming.

<=>:

Please note that there are federal rest=ictions on this benefit which the Puerto Rico law meets and that we will n=ed to be mindful of. These are designed to prevent gains that have a=crued while a person was a resident of the U.S. from not being taxed by a =erritory to which the person relocated. The main rule here is that t=ere are no restrictions on elimination of tax on gains for any person who =as already lived in a territory for 10 years. To the extent that the=period of territorial residency is shorter, then an exemption is still all=wed for part of the gain, and the amount depends on whether the gain is on=publically traded securities or other property. In the case of publi=ally traded securities, an exemption is allowed for the exact portion of t=e taxpayer's gain that accrued during the "possessions hol=ing period". That term is defined as the part of the taxpaye='s holding period that occurs while he is a territorial resident.=C2 For other property, the limitation on gain exclusion test is similar=but since there is no market to which to mark the value of the property at=the commencement of the possessions holding period, the gain is treated as=having accrued ratably over the entire holding period with the result that=the exemption applies based on the ratio of the number of days in the taxp=yer's possession holding period to the entire number of days in th= holding period.

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Let me know your thoughts.<//=>

William Blum I Partner

SOLOMON BLUM HEYMANN LLP =C2 =AO =C2

New York, NY 10005

Tel

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