We have now received our second round of regulations interpreting Section 1400z-2, also known as the investment in Opportunity Zones section of the Internal Revenue Code. In our previous posts , we have provided background and tracked important developments with the program. Now and in future posts, we will highlight finer points that stakeholders should be aware of when considering the program.
One significant timing point to be aware of is how much time an investor has to invest into a Qualified Opportunity Fund. The general rule is 180 days after the date of sale of the property creating the capital gain. However, there is a very important nuance to be aware of for investors who think they have missed their window to invest. For individuals or entities in pass-throughs for tax purposes like partnerships, S corporations, trusts, etc., you may have 180 days starting on the last day of the entity’s taxable year that sold the property to invest into a Qualified Opportunity Fund.
For example, if LLC ABC is a calendar year partnership for tax purposes and has two members, and ABC sold assets on February 1, 2018, then each partner’s 180 day period ought to begin on December 31, 2018 to invest the gain into a Qualified Opportunity Fund. LLC ABC has 180 days from February 1, 2018, but the individual members’ clock to invest begins at the end of the taxable year. This would give the members of ABC until late June of 2019 to invest into a Qualified Opportunity Fund! Surely, a huge factor to take into consideration.
Check back for other important tips for working with Qualified Opportunity Funds, and contact me if you would like help with getting started with this unique tax incentive program.
Any tax advice expressed above by Bean Kinney & Korman, PC was not intended or written to be used, and cannot be used, by any taxpayer to avoid U.S. federal tax penalties. If such advice was written or used to support the promotion or marketing of the matter addressed above, then each offeree should seek advice from an independent tax advisor.
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