The recently enacted Tax Cuts and Jobs Act (TCJA) introduces two elections, one to defer gain from the sale of property that is reinvested in an investment in a Qualified Opportunity (QO) Fund and another to permanently exclude gain from the sale or exchange of the investment in the QO Fund. These elections can provide substantial tax benefits for taxpayers who can satisfy the detailed and quite complex set of rules.
Designation of Qualified Opportunity Zones: Under the TCJA, a state's chief executive officer (CEO) (generally, a governor or the mayor of the District of Columbia) can designate certain low-income community census tracts as Qualified Opportunity Zones (QO Zones). The state's CEO has 90 days (plus another 30 days, under an extension) after the date of enactment to nominate a tract as a Qualified Opportunity Zone, by notifying IRS in writing of the nomination. IRS then has to certify the nomination and designate the tract as a QO Zone within 30 days (plus another 30 days under an extension), after receiving the notice. Thus, a designation has to have occurred before June 21, 2018 and remains in effect for 10 calendar years. Census tracts in Puerto Rico that are low-income communities are considered to be certified and designated as QO Zones, effective on Dec. 22, 2017.
QO Funds: A QO Fund is an investment vehicle organized as a corporation or a partnership for the purpose of investing in a QO Zone. The QO Fund can't invest in another QO Fund, has to hold at least 90% of its assets in QO Zone property (i.e., any QO Zone stock, any QO Zone partnership interest, and any QO Zone business property). A QO Zone property has to meet many requirements, including that substantially all of the entity's business property is used in a QO Zone. A penalty can apply to the QO Fund if it fails to meet the 90% requirement.
For more information about Qualified Opportunity Zones (QO Zones), go with a CPA firm that goes above and beyond, contact PIASCIK to set up a consultation. We’ll meet with you to show you all the benefits of being a PIASCIK client. (U.S.) (866) 501-4013, (International U.S.) +1 (804) 527-1815, (E-mail) info@piascik.com
