A Significant Opportunity Zone Deadline Is Quickly Approaching

As has been the case over the past couple of years, alternative zone (“OZ”) investments have been the topic a lot curiosity from taxpayers and buyers throughout 2021. This curiosity has led to the funding of great quantities of capital into OZ initiatives all through the nation. Curiosity within the OZ program has been pushed largely by three potential tax federal tax advantages accessible to OZ buyers, together with:

  1. Deferral of tax on the capital acquire revenue invested right into a qualifying alternative fund (“QOF”) till December 31, 2026;

  2. Everlasting exemption from tax on 15% of capital acquire revenue invested right into a QOF and held for a minimum of 7 years by (or everlasting exemption from tax on 10% of capital acquire revenue invested right into a QOF and held for a minimum of 5 years) by December 31, 2026; and

  3. Everlasting exemption from tax on good points realized upon the exit of an OZ funding held for a minimum of 10 years. 

Whereas present legislation gives taxpayers with the potential alternative to qualify for the tax advantages famous in clauses (1) and (3) above with respect to qualifying investments made right into a QOF as late as December 31, 2026, the deadline for buyers searching for to qualify for the tax profit described clause (2) above will quickly be expiring. Particularly, though the 15% exemption is not accessible with respect to investments right into a QOF made after December 31, 2019, the ten% exemption remains to be accessible to taxpayers and buyers that make qualifying investments right into a QOF by December 31, 2021. Should you presently have eligible capital acquire revenue and are involved in benefiting from the ten% exemption, now could be the time to behave.

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