The Opportunity Zone program is a new investment vehicle created under a provision of the Tax Cuts and Jobs Act of December 2017. The program was developed to encourage investors to invest funds in economically distressed communities thereby stimulating economic development in these areas. When certain funds are invested in these communities, known as Qualified Opportunity Zones (QOZ), investors are able to enjoy immediate as well as eventual tax benefits. Such benefits can include deferral of gain, partial forgiveness of deferred gain and complete forgiveness of certain additional future gains if certain investment criteria are satisfied. On October 19th, the Treasury Department and the Internal Revenue Service issued proposed regulations and other published guidance for the new QOZ tax incentive. The proposed regulations can be found here:
Under the program, investors are able to temporarily defer some capital gains taxes and potentially eliminate certain other future capital gains taxes when they invest their realized gains in a Qualified Opportunity Fund (QOF), which is a corporation or partnership that invests at least 90% of its assets in QOZ property or interests. The realized gains must be invested in a QOF within 180 days of the realization- typically the date of sale of the asset. The QOF may not simply purchase and hold the QOZ property or asset, but must make substantial improvements to that property.
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