Opportunity Zones

Investing benefits
Investing in an Opportunity Zone yields three types of attractive benefits:

Capital gains tax deferment

Capital gains tax reduction or “trimming"

Capital gains tax elimination

The level of benefit investors can take advantage of depends upon several distinct factors.
Profits from the sale of an existing investment will accrue tax. But using those profits, or capital gains, to reinvest in a qualified Opportunity Zone gives investors a deferment on paying those capital gains taxes, either until that new interest is sold or until the year 2026, whichever comes first.
What’s even better is that investors could see those capital gains tax payments reduced by 10% or even 15%.
Reducing Capital Gains Tax Payments By 15%
To get a 15% reduction in paying capital gains tax from the sale of old property, an investor must use profits from that sale to reinvest in an OZ within 180 days of that sale. Further, they must finalize that new, OZ transaction before the end of 2019 and hold onto that investment through 2026. This fulfills the new tax code’s seven-year requirement.
Reducing Capital Gains Tax Payments by 10%
To get a 10% reduction in paying capital gains tax on the sale of old property, an investor must use profits from that sale to reinvest in an OZ by 2021, and they must hold onto that investment for a full five years, or until 2026.
Getting Capital Gains Tax Eliminated or new investment only
In order to see a complete elimination of capital gains tax payments, investors can purchase a new investment in a qualified Opportunity Zone (using their previous capital gains) but they must hold that interest for ten years or longer. The capital gains tax is eliminated on the future sale of the investment made with an investor’s initial capital gains investments.

In other words, one would still have to pay deferred and potentially trimmed capital gains tax on their old investment in 2026, but when that Opportunity Zone investment is sold, if it were held for ten years or longer, no capital gains tax would be due.

How can I get more information about opportunity zones?

Answer: Additional information can be found at the Tax Reform site of the IRS.gov website. Scroll to Opportunity Zones and click www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions. Also, by entering “opportunity zones” in the search box available at Treasury.gov and IRS.gov.
Do I need to live in an Opportunity Zone to benefit for the tax deferral?

Answer: No. You can get the tax benefits, even if you don’t live, work or have a business in an opportunity zone. All you Where are Opportunity Zones required to do is invest a recognized in an Opportunity Fund and elect to defer the tax on that gain.
Can a limited liability company (LLC) be an Opportunity Fund?

Answer: Yes. A LLC that chooses to be treated either as a partnership or corporation for federal tax purposes can organize as a Qualified Opportunity Fund.
When I transfer property to a Qualified Opportunity Fund (QOF), does my holding period of the property also transfer to my QOF eligible investment?

Answer: No. The opportunity zones tax incentives provisions determine a taxpayer’s holding period in a qualifying investment in a QOF without regard to the holding period of the cash or other property transferred to the QOF.
Can I transfer property other than cash as an investment to a QOF?

Answer: Yes. A taxpayer can transfer property other than cash as an investment to a QOF. However, a transfer of non-cash property may result in only part of the investment being eligible for opportunity zone tax benefits, so that not all of the taxpayer’s capital gain is able to be deferred. See proposed regulations §1400Z2(a)-1(b)(9) & (10).
Can I defer section 1231 capital gain net income for a taxable year under the opportunity zone rules?

Answer: Yes. If a taxpayer’s section 1231 gains for any taxable year exceed the section 1231 losses for that year, the net gain is long-term capital gain. A taxpayer can elect to defer some or all of this capital gain under section 1400Z-2 by making an investment of a corresponding amount in a Qualified Opportunity Fund (QOF) during the 180-day period that begins on the last day of the taxpayer’s taxable year.
I deferred a gain based on an investment in a QOF, and now I gave the investment to my child before the deferral period had ended. Is there anything that I need to do?

Answer: Yes. The deferral period ended when you gave away the QOF investment. You must include the deferred gain when you file your return, reporting the gain on Form 8949.
I deferred a gain based on an investment in a QOF, and now that QOF has dissolved before the end of my deferral period. What happens to my deferred gain?

Answer: When the QOF dissolved, the deferral period ended, and you must include the deferred gain when you file your return, reporting the gain on Form 8949
I made an investment in the Qualified Opportunity Zone After holding it for 10 years and I sell or exchange it. Can I adjust the basis to a fair market value?

Answer: Yes, but only if you made the investment in connection with a proper deferral.
How can I defer my gain of 2018 stock sales?

Answer: See How To Defer Tax on Eligible Gain Invested in a QO Fund in the Form 8949 instructions.
Where are opportunity zones located?

Answer: Qualified Opportunity Zones can be found at Opportunity Zones Resources.

Opportunity Zones

Investing benefits

What’s even better is that investors could see those capital gains tax payments reduced by 10% or even 15%.

Reducing Capital Gains Tax Payments By 15%

Reducing Capital Gains Tax Payments by 10%

Getting Capital Gains Tax Eliminated or new investment only

FAQs