January 29, 2020 - Douglas Myser

Final regulations on opportunity zones. After considering over 300 formal comment letters and additional taxpayer feedback, the Treasury Department and IRS have issued final regulations on Opportunity Zones to provide clarity and certainty for investors and communities. Final regulations on opportunity zones. What types of gains may be invested and when ?  

As a general rule---The final regulations amend the proposed regulations general rule that only capital gain may be invested in a Qualified Opportunity Fund during the 180 day investment period by clarifying that only eligible IRS gain taxable in the United States may be invested in a Qualified Opportunity Zone. Sales of Business Property--The proposed regulations only permitted the amount of an investors gains from the sale of business property that were greater than the investor's losses from such sales to b invested in Qualified Opportunity Zones, and required the 180 day investment period to begin on the last day of the investor's tax year. The final IRS regulations allow a taxpayer to invest the entire amount of gains from such sales without regard to losses and change the beginning of the investment period form the end of the year to the date of the sale of each asset.

Partnership gain---Partners in a partnership, shareholders of an S corporation, and beneficiaries of estates and non-grantor trusts have the option to start the 180 day investment period on the due date of the entity's tax return, not including any extensions. This change addresses taxpayer concerns about potentially missing investment opportunities due to an owner of a business entity receiving a late Schedule K-1 from the entity. Investment of Regulated Investment Company and real Estate Investment Trust gains (REIT)--The rules clarify that the 180 day investment period generally starts at the close of the shareholder's tax year and provides that gains can, at the shareholder's option, also be invested based on the 180 day investment period.

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