• Wyatt Franta

IRS Extends Opportunity Zone Deadline

Investors now have until the end of the year to roll over capital gains into Opportunity Zone funds.

Opportunity Zone rules allow investors 180 days to roll over capital gains into a Qualified Opportunity Fund (QOF). Investors whose 180-day period would have normally ended between April 1, 2020, and December 30, 2020, now have until December 31, 2020. This news was released a week prior to our blog release following a post from the IRS.

By extending the deadline, the IRS hopes to keep investor dollars flowing into the highly popular program. The extension also helps Opportunity Funds facing pressure to inject their cash into projects by June 30, 2020. Under the QOF rules, Opportunity Funds need to utilize their cash relatively quickly, measured by two semi-annual deadlines—generally June 30 and December 31.

For those unfamiliar with some of the benefits Opportunity Zones provide, a copy-and-paste synopsis of Section 1400Z-2 of the Internal Revenue Code can be found below:

  • Initial Gain Deferral – A taxpayer may elect to defer recognition of capital gains from other transactions to the extent the gain amount is invested in a QOF within the 180-day period beginning on the date the capital gain would be recognized by the taxpayer. The gain is generally deferred until earlier of: i) the date on which the QOF investment is sold or exchanged (or otherwise subject to an inclusion event), or ii) December 31, 2026.

  • Partial Reduction in Deferred Gain – For investments in QOFs made after December 31, 2019, and before December 31, 2021, a taxpayer may permanently exclude from income 10 percent of the deferred gain if the QOF investment is held at least five years.  

  • QOF Gain Exclusion – If a taxpayer holds a QOF investment for at least 10 years, the taxpayer may generally elect to exclude from income any post-acquisition gain realized from the sale or other disposition of the QOF investment.

Finally, to get a more in-depth explanation of the QOF extension and what it applies to, check out an article by National Law Review here

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