Deadline for Qualified Opportunity Zone Reinvestment Fast Approaching
The Qualified Opportunity Zone (QOZ) program offers investors the ability to reinvest eligible gains from the sale of essentially any asset within 180 days of the recognition date. For investors who realize gains through a Schedule K-1, the QOZ investing timeline can be extended to begin on the federal tax return due date of the entity (generally March 15), which may allow more time to take advantage of QOZ tax benefits.
“The Opportunity Zone program offers taxpayers the ability to build lasting value by creating permanent tax savings when compared to similar non-Opportunity Zone investments. The ability to permanently exclude future gain after an Opportunity Zone investment that has been held for 10 years can generate a significantly higher after-tax result.”
– Brian Duren, Signing Director
Example: If a partnership realizes capital gains on May 1, 2022, the gain would be reported on the partner’s Schedule K-1. The partner can choose to use the due date of partnership’s federal tax return as the beginning of the 180-day period, which for this example would likely be March 15, 2023, after the close of the partner’s tax year. The partner would then have until September 10, 2023 (March 15 + 179 days, considering that the recognition date is considered Day 1) to reinvest capital gains into a Qualified Opportunity Fund.
Special consideration should be given to 2022 gains invested using the 180-day period ending September 10, 2023 because this date is a Sunday, and banks and businesses will likely be closed. Therefore, taxpayers seeking to invest a capital gain into a Qualified Opportunity Fund should plan for funding transfers to occur on September 8, 2023 or September 9, 2023, if possible.
This opportunity may be available to taxpayers that have already filed their 2022 return if they filed under an extension. A careful evaluation of the facts and circumstances and consultation with a tax advisor is strongly encouraged.
Thank you to Jack Rybicki, Omer Abramovich and Brian Duren for collaborating with me on this post.
- Carey M. Heyman, CPA
- Managing Principal of Industry - Real Estate
- CliftonLarsonAllen LLP
- Century City (Los Angeles)
Carey is the Managing Principal of the Real Estate Industry at CLA. He is a trusted advisor with close to 20 years of experience providing accounting, assurance, tax, and consulting services to real estate industry owners, operators, family offices, developers and syndicators. Carey has a strong track record of helping clients build and retain capital by leveraging tax- and cost-saving strategies and employing tax credits and incentives. He also consults with high net worth individuals, large family groups, and owners of closely-held businesses on all aspects of tax planning, estate planning, and retirement planning.
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