Can an Opportunity Fund Be a Sole Member Llc Filing as S Corp

Updated for IRS Notice 2020-39 and IRS Notice 2021-10

It's been said that the sign on the door of opportunity reads Push button. If you have or volition have long- or brusk-term capital gains from selling investments in real estate, securities or other appreciated assets — and you're considering reinvesting in a business organization or in existent estate — now'southward the time to push. Or at to the lowest degree to consider pushing.

Why? The emergence of the Opportunity Zone. Created by the Investing in Opportunity Human action (a part of the Tax Cuts and Jobs Human activity), it's described by many as a once-in-a-lifetime taxation do good.

In brief, if you lot reinvest majuscule gains in existent manor or other businesses located in an Opportunity Zone, you lot'll defer (and potentially reduce) the tax on your reinvested gain. And then, if you hold the investment long enough, you'll eliminate the revenue enhancement on your new investment'due south time to come appreciation. Even better, if you lot're interested in bear on investments and socially responsible investments, you'll also be doing a skilful thing.

What is an Opportunity Zone?

An Opportunity Zone is an economically distressed community that conveys preferential tax treatment to long-term investors under federal taxation rules. In other words, information technology'due south a revenue enhancement-based economic development tool intended to spur investment and create jobs in troubled areas of the country.

To be designated an Opportunity Zone, a demography tract must first exist nominated by the land or other jurisdiction for this purpose and then exist certified past the U.Due south. Treasury and the IRS.

For an area to qualify as an Opportunity Zone it must exist characterized past either of the post-obit:

a poverty rate of at to the lowest degree xx per centum, or

a median household income that is less than eighty percent of the median household income of its neighbors.

In total, there are more than 8,700 certified Opportunity Zones. They are located in every country, plus the District of Columbia and v U.Southward. territories. And they're non all rural or inner-metropolis — some of the locations just might surprise you lot.

You can enquiry the tracts designated as Opportunity Zones using the online tool Opportunity Zone Explorer. The IRS has also published a list of tracts, by state, in Observe 2018-48.

What Are the Taxation Benefits for Opportunity Zone Investors?

While Opportunity Zones were created past a federal tax law, in that location are implications for taxes levied at federal and country levels.

Federal Tax Benefits

Over fourth dimension, you gain three significant federal tax benefits from your qualifying investment in a Qualified Opportunity Fund. The first two apply to the original capital proceeds that you reinvest. The third applies to the longer-term appreciation in the value of your Opportunity Zone investment.

Deferral Y'all can defer the taxation that would otherwise be due on the uppercase gains that arise from transactions betwixt December 22, 2022 and before January one, 2027 and that you lot reinvest in the Opportunity Zone. However, you tin can't defer a gain if information technology arises from a sale or exchange with a related party.

Typically, the deferral extends until December 31, 2026. At that time, the amount of the underlying gain that yous reinvested is taxable, less any exclusion percent based on your holding menstruation, as described beneath.

However, there are two events that can end the deferral at an earlier engagement:

a sale or exchange of all or a portion of your investment

an inclusion event

Exclusion If you lot hold your qualifying investment in the Opportunity Zone for more five years, you can exclude ten per centum of the deferred gain from federal capital gains tax. In other words, only 90 percentage of the original gain is subject field to tax.

If you concur your qualifying investment for more seven years, you can exclude 15 percent of the deferred gain from federal capital gains taxation. 85 percent of the gain is subject to tax.

Footstep Upwardly in Footing If y'all hold your qualifying investment for more than than x years, its tax ground increases to its fair market place value every bit of the date you lot sell or exchange it. In other words, yous get a stepped up basis. That means your qualifying investment in the Opportunity Zone appreciates revenue enhancement-free, similar to that of a Roth IRA investment. You lot won't pay whatsoever capital gains tax on the appreciation when you sell or substitution it.

Chiefly, if you sell your qualifying investment earlier the stop of the x-year menstruation, y'all tin roll information technology over into another qualifying investment.

Land Tax Implications

Generally, if a state's taxation structure conforms to the federal Internal Revenue Code, the tax rules regarding investments in Opportunity Zones also apply at the land tax level. Merely that'southward not e'er the example.

Information technology'due south further complicated by the fact that an Opportunity Zone investment tin involve more than than one country.

And then, certain states with conformity provisions specifically elected out of conformity when information technology comes to Opportunity Zones. In other words, you may non get any land tax benefit from your investment. Other states that practice not typically adapt to federal rules have adopted specific state-level tax benefits related to Opportunity Zones, which may or may non be similar to the federal rules.

Unfortunately, because the tax rules at the federal and country levels aren't always in sync when it comes to Opportunity Zones, information technology may exist necessary to separately rails these investments at federal and individual state levels.

Sound unproblematic enough? Here'southward where information technology gets complicated.

Click for details

What is a Qualified Opportunity Fund?

If yous want your investment to authorize for the Opportunity Zone'southward tax benefits, you must invest via a Qualified Opportunity Fund.

Your investment must take the class of cash or property in return for an equity investment in the fund. If you received an interest in the fund for services performed, that interest is not eligible for the Opportunity Zone'southward taxation benefits. In other words, carried interest is non a qualifying investment.

Yous tin can buy your equity interest in the fund from a tertiary party.

A Qualified Opportunity Fund is an investment vehicle established to invest in Qualified Opportunity Zone Belongings — i.e., eligible businesses and property that are located in a qualified Opportunity Zone. In fact, the fund must invest at least ninety per centum of its assets in such Opportunity Zone Property (also known as the 90/10 test).

Under Notice 2020-39, if the cease of the 180-mean solar day period you have to reinvest your capital proceeds in a Qualified Opportunity Fund falls between April 1, 2022 and December 31, 2020, y'all have until December 31, 2022 to make the investment.

The fund must be created or organized (under the police force of the U.South. or of one of the 50 states, D.C. or a U.Due south. Territory) as a partnership, a multi-member LLC that elects to exist taxed equally a partnership or a C or S corporation.

To qualify and remain qualified, the fund must cocky-certify annually using a course attached to its federal income tax render. The fund must tell the IRS both the outset tax yr and the first calendar month that information technology wants to exist treated as a Qualified Opportunity Fund.

Under Detect 2021-10, if the end of the 180-day period you have to reinvest your capital proceeds in a Qualified Opportunity Fund falls on or after Apr 1, 2022 and before March 31, 2021, you have until March 31, 2022 to make the investment.

Who Can Invest in a Qualified Opportunity Fund?

Investments in a Qualified Opportunity Fund, with accompanying taxation benefits, are available to the following:

individuals
multi-member LLCs that are treated as partnerships or corporations for federal income tax purposes
S corporations
partnerships
C corporations, including regulated investment companies (RICs) and real estate investment trusts (REITs)
trusts
estates

As a upshot, the gains to exist reinvested tin can come from any number of sources — including real manor developers, affluent individuals and families and their family offices, venture capitalists and investment or individual equity banks, fifty-fifty mutual funds.

What Are the Requirements Placed on Investors?

You lot must reinvest your capital gain in a Qualified Opportunity Fund during the 180-day period that begins on the engagement you sell or exchange the underlying asset for a gain — mostly, the day the proceeds would exist recognized for federal income tax purposes. As previously noted, Discover 2020-39 extends this deadline to December 31, 2022 if the original borderline savage between April 1, 2022 and Dec 31, 2020.

However, Observe 2021-10 extended this deadline to March 31, 2022 if the concluding day of the 180-day period falls on or after April one, 2022 and earlier March 31, 2021.

The final regulations permit yous to reinvest Section 1231 gains beginning on the date of the underlying transaction — without first netting them against any losses incurred during the year. This treatment is in contrast to the general rule which otherwise requires that Section 1231 gains and losses be netted confronting each other at the end of the year to decide whether they're taxed as capital gains (net 1231 gains) or ordinary losses (net 1231 losses). Note that Section 1231 gains are gains that effect from the auction or exchange of real or depreciable property held more than one year.

Yous must actively make an election to defer your gain using a form you lot file with your tax return for the yr in which the gain occurred.

If you are a partner, fellow member, shareholder or beneficiary of an entity with a qualifying gain and that entity does not elect to reinvest that gain, you can elect to reinvest your portion of the proceeds at the individual level. In this case, you have a choice as to the showtime date of your 180-solar day flow.

Typically, the kickoff date of the 180-twenty-four hours menstruum is the final day of the entity's taxation year. Nonetheless, you can elect to use either of the following: the actual (earlier) appointment on which the entity would take recognized the gain for taxation purposes or the original (non extended) due engagement of the entity's tax return. The latter choice does not apply to the grantor of a grantor trust.

Chiefly, if the 180th mean solar day falls on a holiday or weekend, there is no extension. That means the actual deadline falls on the last concern day earlier the vacation or weekend.

If the date of the gain is about the end of the tax twelvemonth and you oasis't made a last decision equally to whether you want to brand the election, it is important to extend the filing date of your tax return.

What Are the Requirements for a Qualified Opportunity Fund Investment?

In that location are a number of specific requirements placed on a Qualified Opportunity Fund, and this is where it really gets complicated.

A qualified investment in an Opportunity Zone Fund must be an equity investment received in exchange for greenbacks or property. Debt instruments are not permitted.

Upper-case letter Gain

The underlying gain being reinvested must be one that is treated as a upper-case letter gain for tax purposes, and that would be recognized if not for the Opportunity Zone investment. Just the gain portion of the transaction qualifies for preferential tax treatment and that proceeds cannot stem from a sale or exchange with a related person.

There are no limits placed on the amount of majuscule gains you tin can reinvest in an Opportunity Zone Fund. You can invest only part of your gain, invest multiple gains, make multiple investments over time, rollover gains into new fund investments — even invest more than your proceeds, although that is considered a divide investment that does non qualify for preferential tax treatment.

Deferred Gains and Inclusion Events

As previously noted, a gain reinvested in a Qualified Opportunity Fund is deferred until December 31, 2026 — but only as long as that gain remains invested in the fund.

Selling or exchanging your investment earlier that date, either in total or in part, triggers tax on all or office of the deferred gain. In other words, you must recognize (include) deferred proceeds for tax purposes to the extent that yous reduce your direct equity investment in the Qualified Opportunity Fund.

Your deferred proceeds too becomes taxable upon an inclusion event. In general, this is an result that reduces or eliminates your direct or indirect investment in the Qualified Opportunity Fund.

The regulations identify a number of inclusion events, including the following:

nearly transfers of the investment in the Qualified Opportunity Fund past gift or charitable contribution

a disposition by a beneficiary or heir who originally received the qualifying investment upon the death of the investor

a taxable disposition of a qualifying investment

a distribution by a corporate Qualified Opportunity Fund that exceeds the investor's ground in the corporation'southward stock

a distribution by a partnership Qualified Opportunity Fund that exceeds the investor's ground in the partnership

the Qualified Opportunity Fund is dissolved

the involvement in the Qualified Opportunity Fund becomes worthless

Inclusion events do not include, for example, a souvenir made to a grantor trust or a transfer of the investment in the Qualified Opportunity Fund upon death.

Estate Planning Considerations

The transfer of an Opportunity Zone Fund investment upon death is not considered an inclusion consequence. This ways the deferred gain is non taxed to the estate or beneficiary until the earlier of an inclusion effect or December 31, 2026.

The unique tax benefits of an Opportunity Zone Fund investment transfer to the manor or beneficiary, assuming the requisite property periods are met. The decedent's holding period is added on to the holding period of the estate or casher.

For estate planning purposes, the value of the Opportunity Zone Fund investment at the date of expiry is included in the decedent's estate. However, different more than traditional investments, this investment is non eligible for a stride-up in basis to its value at the engagement of death. As a result, the gain inherent in a subsequent sale is taxable, assuming the x-year Opportunity Zone holding menstruum is not met.

Inheriting an Opportunity Zone Fund investment could as well effect in a liquidity problem for the estate or beneficiary. While the value of the investment at the date of death is included in the estate, the investment may provide merely minimal liquidity to pay whatever estate tax due. This is because if yous sell the investment prior to the 10-year Opportunity Zone holding period, you lose the master Opportunity Zone tax benefit: a pace-upwardly in basis to the investment'south fair market value upon a subsequent auction.

The xc Percent Asset Test (90/10 Test) for Qualified Opportunity Zone Property

A Qualified Opportunity Fund must invest at least 90 percent of its assets in Qualified Opportunity Zone Belongings. This test is performed twice a year — measured on the last mean solar day of the first six-calendar month period of the QOF's tax year and on the last twenty-four hours of its tax yr. Information technology is performed with reference to either the applicable financial statements or the cost of each asset. If the fund does non see the test, it is subject to penalty.

Under Detect 2021-10, for testing dates between Apr 1, 2022 and June 30, 2021, a Qualified Opportunity Fund that fails a semi-annual test volition non be butterfingers every bit a QOF. And it is non subject to penalty. For investors, the failure does not mean that the investment in the QOF is not a qualifying investment.

Two Types of Qualified Opportunity Zone Investments

To satisfy the xc/ten test, the fund can choose either of 2 types of investments:

direct investments in Qualified Opportunity Zone Business Property where the fund itself conducts an active merchandise or business organization and owns the belongings. Chiefly, a business concern that simply enters into a triple-net lease does not authorize as an active trade or business.

indirect investments in the equity (stock or partnership interests) of a corporation or partnership where the corporation or partnership conducts the business and the business organisation owns the Qualified Opportunity Zone Business concern Property.

As is the case with straight investments, each business must be an active merchandise or business located in an Opportunity Zone. A business concern that simply enters into a triple-internet lease does non qualify as an active trade or business organisation.

Further, the business must be a Qualified Opportunity Zone Business (or a new business organized for this purpose) and must satisfy a number of other requirements.

Virtually chiefly, substantially all of the tangible property that is owned or leased past the business must be Qualified Opportunity Zone Business Property. To satisfy this requirement, essentially all has been defined as at least 70 percentage of the tangible property (the 70/30 test). Note that this test applies simply to indirect investments.

As a result, if the Opportunity Fund invests via this type of indirect investment, 90 percentage of the fund'southward assets must be invested in the business itself, and then 70 percent of the business' tangible property must be Qualified Opportunity Zone Business Belongings. Ultimately, only 63 percent of the indirect investment must be invested in the Qualified Opportunity Zone Business organisation Property (90 percent x lxx percent). This compares favorably to the direct 90 percent required for direct investments as the lower percentage allows for more than flexibility.

The following additional requirements employ to indirect investments — i.e., to Qualified Opportunity Zone Businesses:

fifty percent or more of the concern' total gross income must be derived from the active conduct of a trade or concern in the Opportunity Zone — potentially a limiting gene for many businesses with multi-land, national or international sales operations.

There are three specific safety harbors available to satisfy the 50 pct requirement, at least one of which typically must be met:

hours — at to the lowest degree 50 percent of the business' employees and contractors work hours take place within the Opportunity Zone

payments for services — at least 50 percent of the amounts the business pays to employees and contractors are for services performed in the Opportunity Zone

gross income — the tangible belongings and the essential management/operational functions, both located in the Opportunity Zone, must generate at least 50 percent of the gross income

Withal, for a business that cannot satisfy any of these three tests, there is an additional facts-and-circumstances test.

At least 40 percent of intangible holding has to be used in the agile conduct of the merchandise or business.

Less than five pct of the unadjusted basis of all holding can be nonqualified financial belongings.

Then-called sin or vice businesses — whether operated or leased — are excluded. For this purpose, such businesses are considered to include golf game courses, country clubs, massage parlors, hot tub facilities, suntan facilities, racetracks, gambling facilities and whatsoever shop for which the principal concern is the sale of alcoholic beverages for consumption off premises.

There is, however, a de minimis exception. Information technology applies if the full rentable square feet and the value of the sin business (or businesses) is less than five percent of the cyberspace rentable square feet and less than five pct of the value of all other tangible holding. One example is a hotel that operates a small-scale spa to provide massages and the rentable square feet and value of the spa both fall under the five-percent threshold.

Rubber Harbor for Indirect Investments

The revenue enhancement rules provide for a safety harbor in applying the nonqualified financial property requirement for indirect investments, in part considering of the long planning and implementation periods required for many real manor projects.

With this safe harbor, during a period of up to 31 months — and if sure documentation and scheduling requirements are met — the Qualified Opportunity Zone Business may concur meaning cash and other working capital letter necessary for the project without failing the five percent financial holding test. Nether Discover 2021-10, for existing projects that satisfy the other safe harbor requirements, this condom harbor is extended to not more than 55 months (86 months total for start-upwardly businesses).

In other words, while a Qualified Opportunity Zone Business generally has upward to 31 months (or 62 months for sure projects) to invest your coin in an Opportunity Zone, those within the working uppercase rubber harbor period as of the January 2022 federal disaster proclamation are eligible for a maximum of 86 months. Importantly, you begin deferring your underlying majuscule gain — and establish the kickoff date for the additional tax benefits — as presently as y'all invest in the fund.

If in that location is a delay past the terminate of the safe harbor catamenia and that delay results from a wait for governmental action, the working capital safe harbor is extended — but only if you could not take other activeness to ameliorate the tangible belongings or consummate the projection. The length of the extension would generally be equal to the duration of the permitting delay. Simply to authorize, your application must have been submitted within the original safe harbor menstruum. It is unclear how this provision would be applied as a result of the extension provided past the federally declared disaster area designation.

In the case of subsequent infusions of working capital assets, tangible belongings may authorize for an additional 31-month menstruum (a full of 62 months) in the form of either a multiple overlapping or a sequential working capital letter safe harbor. However, all of the working capital safe harbor requirements must be met. As previously noted, Qualified Opportunity Zone Businesses inside the working capital safe harbor period as of the federally declared disaster area designation volition be eligible for up to 86 months.

Qualified Opportunity Zone Business Property

The shared concept for both straight and indirect investments is Qualified Opportunity Zone Business concern Property, and then the definition is critical.

Qualified Opportunity Zone Business Property is tangible property located in a qualified Opportunity Zone and used in a trade or business. If the property is unimproved state, it volition only qualify if in that location is an expectation or intention that the country will be improved by more than than an insubstantial corporeality within xxx months subsequently the engagement of purchase. This is true regardless of the type of investment (direct or indirect).

In making the decision as to whether the comeback is more than than an insubstantial amount, specific activities to consider are grading, clearing of the land, remediation of contaminated land, or acquisition of related qualified opportunity zone business property that facilitates the use of the land in a trade or business.

Under Detect 2021-10, this substantial improvement requirement is disregarded for the period beginning April 1, 2022 and ending March 31, 2021. Therefore, the 30-month substantial improvement period for Qualified Opportunity Funds and Qualified Opportunity Zone Businesses is tolled during the period first April 1, 2022 and ending March 31, 2021.

Additional requirements include the following:

The property must have been purchased later on December 31, 2017. This requirement is intended to ensure that in that location is a new investment made in the Opportunity Zone.

The original use of the belongings within the Opportunity Zone must brainstorm with the business concern, although the holding does non take to exist new holding. For case, the business tin buy used equipment located outside of the opportunity zone for employ within the zone. Once more, this ensures a new investment in the Opportunity Zone.

Alternatively, the business can buy used belongings within the Opportunity Zone — an older building, for instance — as long as the business substantially improves it. A substantial comeback requires that the business spend more to meliorate the property than it spent to purchase information technology, excluding the cost of any land. It's often called doubling down since the basis must double. Further, that substantial comeback or doubling of ground must be made during whatsoever 30-month menses after buying the property — tolled during the period beginning April 1, 2022 and ending March 31, 2022 according to Detect 2021-ten, as previously noted.

If the business buys a partially completed building, the original use begins when the building is offset placed in service for depreciation.

If it acquires a vacant edifice that has been empty for at least a three-year period, the building can be treated every bit if information technology is new. Here the term vacant refers to real belongings that is significantly unused, meaning that more than than 80 percent of the building or state — every bit measured by the square footage of useable space — is non being used.

Alternatively, a building tin can be treated as new if it has been vacant for an uninterrupted catamenia of at least i calendar yr, extending from the date the holding's location was designated as office of a Qualified Opportunity Zone and extending through the engagement of purchase.

At to the lowest degree lxx pct of the apply of the property must occur within the Opportunity Zone for at to the lowest degree 90 percent of the business concern' menstruation of ownership.

It is possible for leased belongings to satisfy the requirements for Qualified Opportunity Zone Business Property. Even so, the lease must be established at arms-length and must be entered into afterward December 31, 2017. The lease does not take to satisfy either the original-use or the substantially improved requirements and there are separate related-party requirements.

How Do the Ii Types of Qualified Opportunity Zone Fund Investments Compare?

	Fund is a business concern that directly owns Qualified Opportunity Zone Business Property	Fund owns disinterestedness involvement in a Qualified Opportunity Zone Business organisation
Bailiwick to xc/10 asset test	Yes. 90% of fund's avails must be Qualified Opportunity Zone Property	Yes. 90% of fund's assets must be Qualified Opportunity Zone Holding
Subject to lxx/30 examination	N/A	Yep. 70% of the business' tangible property (endemic or leased) must be Qualified Opportunity Zone Business Holding
Active trade or business requirement?	N/A	50% or more of gross income must be from agile conduct of merchandise or concern in the Opportunity Zone
Eligible for working capital safe harbor?	N/A	Working capital safety harbor allows business organisation to hold cash for acquisition, construction and/or rehabilitation of tangible property during initial 31 month menstruum. May exist eligible for multiple working capital condom harbor periods up to 62 months (86 months with the federally alleged disaster declaration)
Investments in sin or vice businesses precluded?	Northward/A	Investments in these businesses are not permitted

What Happens When an Investor Sells Equity in the Qualified Opportunity Fund, or the Fund Sells Avails?

Before Ten Years

If yous sell some or all of your investment in a Qualified Opportunity Fund without property the investment for at least 10 years, in that location is no stride-up in basis. Any gain on the auction of the investment is subject to federal income tax.

The sale as well triggers tax on the deferred gain — assuming the auction happens earlier Dec 31, 2026, at which fourth dimension the tax on this gain automatically becomes due.

If a Qualified Opportunity Funds receives proceeds from the return of capital or the sale or disposition of some or all of its investment in Qualified Opportunity Zone Belongings earlier the end of the 10-yr holding period, it has a reasonable amount of fourth dimension (12 months) to reinvest the proceeds in another qualifying property. However, nether Notice 2021-x, if a Qualified Opportunity Fund'south 12-month reinvestment period includes June 30, 2020, the QOF receives no more than an boosted 12 months, including any relief previously provided under Find 2020-39. This results in a maximum of 24 additional months total to reinvest the proceeds in another qualifying property.

There is an exception. If the reinvestment is delayed beyond the specified 12 months due to governmental activity or inaction, it does not neglect to satisfy this requirement.

Importantly, until reinvested, the proceeds must be held in cash, cash equivalents or debt instruments that take a life of xviii months or less.

If these requirements are met, the proceeds authorize under the xc percent asset test and do not trigger recognition of the investor's previously deferred gain.

However, there may be other revenue enhancement consequences to the Qualified Opportunity Fund and its investors. If the fund realizes a gain on the sale of these assets, that proceeds is taxable. The fund's investors must recognize their share of the gain for revenue enhancement purposes if the fund is operating as an S corporation or a partnership.

After Ten Years

If you sell your disinterestedness interest in the Qualified Opportunity Fund later on the x-twelvemonth holding period, the value of your investment steps up to the fair market value as of the time of sale. In other words, yous can exclude any proceeds from the auction of your disinterestedness investment that results from reinvesting the deferred gain.

Simply what if you adopt to hold your equity investment across the ten years but the fund sells avails? Can you notwithstanding become a tax do good if the fund realizes the proceeds? Or are you forced to sell equity to go the step up in basis?

A partner or shareholder who has held an involvement in the Qualified Opportunity Fund for ten years or more may elect to exclude all gains and losses allocated to the qualifying investment that arise during the taxable year. There is an exception for gains and losses from the auction of inventory in the ordinary course of concern.

To forbid a Qualified Opportunity Fund from retaining auction gain and reinvesting them tax-gratis in perpetuity, the proceeds may exist treated as a deemed distribution and re-contribution. The result is a mixed-fund investment (part qualifying, part nonqualifying). For the nonqualifying portion of the investment, gains are no longer tax-complimentary.

How does an Opportunity Zone Investment Compare to a 1031 Commutation?

At that place are meaning differences between the tax benefits that accrue from an investment in an Opportunity Zone versus like-kind property that qualifies for a 1031 exchange.

Among the major differences are that, for a 1031 commutation, just your existent estate assets qualify and the substitution must include the value of the asset and the gain. For an Opportunity Zone investment, all assets that give rise to a capital proceeds qualify and but the gain portion of the transaction must be reinvested.

The fourth dimension horizon is another divergence. For a 1031 exchange, the step-upward in basis only occurs upon death. For an Opportunity Zone investment, the increase in basis occurs one time the investment is held for more than 10 years.

	Opportunity Zone	1031 Exchange
Qualifying gain	Almost any short- or long-term gain that is treated as a capital gain	Existent estate only
Amount that must exist reinvested	Gain portion merely	Full sales price — including both the nugget'south initial footing and gain
When reinvested gain is taxed	The earlier of when asset is sold or December 31, 2026	When (if) asset is sold
When appreciation of reinvestment is taxed	Stepped up basis after 10 years	Stepped up basis upon expiry
Depreciation recapture subject to tax as ordinary income	No, if held greater than 10 years	Yes

The federal tax rules for Opportunity Zones are detailed and circuitous, and cannot be fully explained in this overview. Consult with a tax advisor before making whatever business organisation or financial decisions based on this tax benefit. If you take additional questions well-nigh Opportunity Zones, requite us a call.

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