Do you/will you have capital gains in 2019? Do you wish to possibly defer the gain?
The Tax Cuts and Jobs Act provides temporary deferral of capital gain income if the gain is reinvested in a qualified opportunity fund (QOF) and the permanent exclusion of capital gains from the sale or exchange of an investment in the qualified opportunity fund, if required holding periods are met. Temporary deferral applies to capital gains that are reinvested in a qualified opportunity zone fund. The IRS explains that Opportunity Zones are designed to spur economic development by providing the following tax benefits to investors:
- Investors can defer tax on capital gains invested with 180 days of the date of sale in a QOF until the earlier of the date on which the investment in a QOF is sold or exchanged, or Dec. 31, 2026. If the QOF investment is held for longer than five years, there is a 10% exclusion of the deferred gain; and if held for more than seven years, there’s a 15% exclusion of the deferred gain.
- There is greater potential for benefit if the investor holds the investment in the QOF for at least ten years before selling it; then the investor is eligible for an increase in basis of the QOF investment equal to its fair market value on the date that the QOF investment is sold or exchanged.
If you would like additional information or think you may want to defer capital gains utilizing an investment in qualified opportunity funds, please contact our office.