A QOF is any investment vehicle that is organized as a corporation or a partnership for the purpose of investing in Qualified Opportunity Zone (QOZ) property (other than another QOF) that holds 90% of its assets in QOZ property. QOZ property includes investments in QOZ stock, QOZ partnership interest, and QOZ business property. This encompasses investments in new or substantially improved tangible property, including commercial buildings, equipment, and multifamily complexes, with a common requirement that such investments must be made in QOZs.
Under the TCJA, Qualified Opportunity Zones (QOZs) are United States Census Tracts that are characterized by low-income communities and families below the poverty line. Approximately half of the census tracts in the United States are considered QOZs, and the federal government is incentivizing investment in these communities.
The TCJA allows for the deferral of gain recognition from capital gain transactions, provided that the gain is reinvested in a QOF within 180 days of the sale. The gain is deferred until the earlier of the date in which the investment in the QOF is sold or Dec. 31, 2026. Finally, if the QOF investment is held for at least 10 years, the taxpayer can elect to increase the basis of the property to its FMV on the date that is sold or exchanged. In this case, any appreciation of the QOF investment above the taxpayer’s initial investment of gain will not be subject to tax.
If you are an investor or have recently had a transaction which resulted in a large capital gain to you, or if capital gains are a large percentage of your income, Qualified Opportunity Funds can be a great way to save money on taxes and revitalize deprived communities. We at MRPR are ready to assist you. You can contact us for more details.