If you anticipate having a large capital gain before 2026, this is an investment you may want to consider.
The Tax Cuts and Jobs Act of 2018 created tax deferral opportunities for capital gains which are invested in Qualified Opportunity Zones. Capital gains that are realized prior to December 31, 2026 and subsequently reinvested in a Qualified Opportunity Zone within 180 days, will be eligible for the following deferrals under the tax law:
• The taxation of the capital gain proceeds which are reinvested will be deferred until December 31, 2026; and
• If the investment in the Qualified Opportunity Zone is held for at least ten years there will not be any capital gains taxed upon the subsequent sale of the investment.
The Qualified Opportunity Zones for Florida have been established by Governor Scott, and approved by the IRS, and there are several opportunities in both Manatee and Sarasota Counties. The map can be found at:
https://deolmsgis.maps.arcgis.com/apps/webappviewer/index.html?id=4e768ad410c84a32ac9aa91035cc2375
Generally the requirements to qualify for these deferrals of tax include:
• Realizing a capital gain from the sale of a capital asset to an unrelated third party; and
• Within 180 days, investing the capital gain into a Qualified Opportunity Fund, which is a corporation or partnership which consists 90% of assets located in a Qualified Opportunity Zone; and
• Electing to defer the gain from the sale or exchange.
Upon meeting the requirements, the tax deferral will be as follows:
• The capital gains incurred upon the sale of the capital asset will be deferred until the earlier of:
o December 31, 2026; or
o When the investment in the Qualified Opportunity Fund is sold.
• The amount of capital gain recognized will be the lesser of:
o The amount of capital gain deferred; or
o The fair market value of the Qualified Opportunity Fund less your basis in the Qualified Opportunity Fund investment.
There is a potential to permanently defer any additional gain on your Qualified Opportunity Fund investment, if held for 10 years.
In the event that a taxpayer holds a Qualified Opportunity Fund investment for at least ten (10) years, the taxpayer will not be subject to any additional capital gain on sale of the Qualified Opportunity Fund investment.
For additional information or questions regarding Qualified Opportunity Zone investments and the tax benefits please contact one of our tax law attorneys, Jenifer Schembri at jschembri@blalockwalters.com or Kristen Ehrlich at kehrlich@blalockwalters.com.
Jenifer S. Schembri – Tax Law
Kristen H. Ehrlich – Tax Law
