Guid­ance is­sued on op­por­tu­nity zone investment­s

Accounting Today - - Tax practice -

Washington, D.C. — The In­ter­nal Rev­enue Ser­vice is­sued pro­posed reg­u­la­tions in mid-April of­fer­ing fur­ther de­tails about in­vest­ment in qual­i­fied op­por­tu­nity zones, a pro­vi­sion of the Tax Cuts and Jobs Act aimed at spurring real es­tate in­vest­ment in com­mu­ni­ties. The pro­posed reg­u­la­tions per­mit the de­fer­ral of all or part of a gain in­vested in a Qual­i­fied Op­por­tu­nity Fund, or QO Fund, that would oth­er­wise be in­cludi­ble in in­come. The gain is de­ferred un­til the in­vest­ment is sold or ex­changed or Dec. 31, 2026, which­ever date comes ear­lier. If the in­vest­ment is held for at least 10 years, in­vestors may be able to per­ma­nently ex­clude the gain from the sale or exchange of an in­vest­ment in a QO Fund.

The new guid­ance aims to make it eas­ier for op­por­tu­nity zone funds to en­sure com­pli­ance with the re­quire­ment that a fund has 90 per­cent of its as­sets in­vested in op­por­tu­nity zones and ex­pands the work­ing cap­i­tal safe har­bors. The pro­posed reg­u­la­tions also pro­vide clar­ity on treat­ment of gains on long-term investment­s, own­er­ship and op­er­a­tion of the busi­ness, and what con­sti­tutes “qual­i­fied op­por­tu­nity zone busi­ness prop­erty.”

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