By: Amanda Wilson
Opportunity zones provide a powerful tool for taxpayers to defer recognizing their capital gains if they roll over their investment into a qualified opportunity zone fund, and offer investors the potential of avoiding recognizing any gain on their exit from the investment if held for at least 10 years. I previously discussed opportunity zones here (https://grayareaofthelaw.com/considering-making-a-qualified-opportunity-zone-investment/). Real estate projects such as new senior living facilities located in opportunity zones are an easy fit for this beneficial tax treatment.
If you are considering making an opportunity zone investment, December 31, 2019 is the last day you can make your investment and receive the maximum tax benefit. This is because the capital gains that are deferred when you roll over your investment must be triggered no later than December 31, 2026. If you have held your investment for at least seven years (meaning you made your investment by December 31, 2019), 15% of your deferred gain will be permanently excluded. Any investments made after December 31, 2019 can only qualify for, at most, exclusion of 10% of the deferred tax gains, and that is if the investment is made before December 31, 2021. It should be noted that Section 1231 capital gains or capital gains flowing through from a partnership are deemed to occur on December 31st, so if you anticipate having capital gains from these sources, you can fund your investment on December 31st and get the maximum tax benefits.