December 31st Investment Deadline Approaching

December 9, 2020
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Dec 31 Deadline

Although Opportunity Zones are expected to have strong participation for years to come, this December 31 brings a unique chance to attract a wave of capital to Opportunity Zones.

In 2020, each US citizen had their lives impacted by the pandemic in some fashion. In response, the IRS provided extensions to OZ investing deadlines for a variety of eligible gains including personal, partnership, section 1231, and section 1250.

This extension gave Opportunity Zones time to mature into a mainstream investment vehicle capable of realizing the original intent of the bill. Opportunity Zone Funds are increasingly recognized as offering high quality projects that are enhanced by one of most significant tax incentives available, and investors are taking notice.

Types of Gains Eligible for Investment

Any form of capital gains realized on or after October 4, 2019 qualify for investment in an OZ Fund until December 31, 2020. Some gains dating back to January 1, 2019 are also eligible. Here is a list of common gains eligible for investment before the December 31st deadline to leverage OZ tax incentives:

  • Partnership gains dating back to January 1, 2019
  • 1231 gains, net gains for 2019 and individual transactions any time in 2020
  • Unrecaptured depreciation (section 1250 gain) dating back to October 4, 2019
  • Individuals gains realized after October 4, 2019

Read our detailed post on types of eligible gains for more information.

Why Invest in an OZ Fund?

By placing funds in a Qualified Opportunity Fund (QOF) with a ten year holding period investors can defer, reduce and ultimately eliminate capital gains tax. The Opportunity Zone program has placed billions of dollars into qualifying projects since the program’s launch in 2018. This year’s extension of the investment deadline means that Opportunity Zones are poised to see their most significant capital infusion yet.

Opportunity Zones were created as a part of the 2017 Tax Cuts and Jobs Act to help bring capital to underserved communities by offering enormous tax incentives for investments placed in specific census tracts. The geographic focus of the program incentivizes investment in traditionally overlooked, underserved markets. High quality projects in these communities offer the potential for outsized returns and can also serve as a catalyst for revitalization in areas that need it most.