Under what circumstances can Section 1231 gains be invested in QOFs?
All of them, though the timing rules have since changed. Under the final regulations, Section 1231 gains will be subject to the same timing rules as another eligible gain, but taxpayers can choose to use the rules under the Proposed Regulations for gains prior to 2020.
Sec. 1231 gains are eligible to be invested in QOFs as long as invested within 180 days of the sale that generated the gains or, if the 1231 gains are from a pass-through entity, within 180 days of the original due date of the entity's tax return.
Section 1231 gains are treated as capital gains. Therefore, qualify for investment in a QOF. After the final regulations, there is no need to wait until the year-end to determine the net 1231 gain. These can be invested when realized during the year.
An investor can defer gains from a gross 1231 gain. They also no longer need to wait until the end of the tax year to make an investment. They now have the same option with the first day of the 180-day investment period as other capital gains.
All circumstances. The gross amount of the gains unreduced by 121 losses.
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