Friday, June 28, 2019 is the most critical date so far to take advantage of the Investing in Opportunity Act. This is the deadline by which taxpayers with capital gains reported on a 2018 Schedule K-1, or that have net capital gains on all 2018 sales of section 1231 property (property used in a trade or business), have to take advantage of potentially significant tax deferral by reinvesting those gains into a Qualified Opportunity Fund.
There are numerous Qualified Opportunity Funds organized throughout the country looking for investments from taxpayers, from single asset to billion dollar funds. Also, taxpayers may form their own self directed Qualified Opportunity Fund, and have a period of up to six (6) months to make investments in “Qualified Opportunity Zone Business Property”.
Investors who make qualified investments of capital gains in a Qualified Opportunity Fund may receive three forms of tax benefits: deferral of tax on the invested gains (until the earlier of December 31, 2026 or the earlier sale of the investment), partial forgiveness of the tax on the invested gains (up to 15 percent if the investment is made in 2019 and held for seven years), and, perhaps most significantly, full forgiveness of the capital gains on the sale of the investment in the Qualified Opportunity Fund if it is held for ten years or more.
If you have significant 2018 Schedule K-1 gains, or net capital gains on all 2018 sales of section 1231 property, consider speaking with a tax and legal advisor as soon as you can before the deadline. Prompt action will preserve benefits that will be permanently lost for those gains after June 28. Also, if you have experienced a significant individual capital gain triggering sale or event, or anticipate one in 2019, be aware that you have 180 days from that event to invest in a Qualified Opportunity Fund if you wish to take advantage of the program.