I’ve heard I need to invest quickly to maximize my benefits. Is that the case? Could I miss the boat if I wait too long?
There is a 180-day timeline that requires you invest that time period after the capital gain event. There are nuances for certain situations (i.e., partners in partnerships and net Section 1231 gains) whereby the 180 period does not start until after the end of the tax year during which a capital gain recognition event transpired.
The current regulations require that to receive the 100% step-up basis on your investment, your funds must be invested by Dec. 31, 2019. There is proposed legislation to extend this date, but it hasn’t been passed yet. Under the current regulations, if you invest past that date, you won’t receive the full step up basis at the end of the investment.
General rule is 180 days from recognition of gain date. If the gain was recognized in a pass through or it is 1231 gain, there is additional time.
The Opportunity Zone program requires investors with eligible capital gains to reinvest them in a Qualified Opportunity Fund (QOF) within 180 days to qualify for the program. In addition, an investor would have to be invested in a QOF by the end of 2019 to maximize the tax exclusion offered by the program — a 15% tax break on the capital gains invested. The end of 2021 is the latest date in which an investor can invest in a QOF and be eligible for the next level of tax breaks, a 10% tax exclusion on the eligible capital gains that are invested in the QOF.
Unless certain elements of the program are extended, the deadline to participate in all of the benefits is Dec. 31, 2019. That will enable investors to receive a 15% step-up in basis for the prior capital gain. Thereafter, the maximum step-up in basis will be 10%.
