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What is the requirement on the timing of OZ Investments?

I'm under the impression that the investment of capital gains into the OZ program must be identified and completed within the next several months? How should I best strategize the investment timing?


Answers
  • Peter McNeil
    August 13, 2019

    An investment must be made within 180 days of the sale creating the capital gain. In the event that the sale is from a passthrough entity such as an S Corp or LLC, the investment must be made within 180 days of the end of the passthrough entities taxable year. If there is a section 1250 gain recapture, the 1250 component of the gain is 180 days from the end of the taxable year. No identification is required. No accommodator is required.

  • Matthew Rappaport
    August 14, 2019

    There's no identification requirement for QOF investments. They are not like Section 1031 exchanges. Instead, there's a 180-day timer, which is flexible in some situations. Also, they're unlike Section 1031 exchanges in which the 180-day timer is "hard" (inflexible). Whether the 180-day timer is flexible for a QOF investment depends on the nature and source of the capital gain to be deferred by making a QOF investment. You should consult your advisors for further details on this.

  • Matt Campbell
    August 14, 2019

    A two-tiered structure should be established so you have a 31-month time period (with establishment of a written plan) that is followed for the development to have more time.

  • Blake Christian
    August 14, 2019

    Unfortunately the rules for when the 180-day period begins is dependent on the type of gain and the source of the gain. While the direct sale of stock, cryptocurrency or other investment assets held directly by a taxpayer (including held in a grantor trust) will generally trigger the 180-day period on the date the sale closes. However, if the gain is an IRC Section 1231 gain (trade or business assets held more than a year) or the gain is flowing from a K-1 investment, the gain is generally not reportable (or investable) until Dec. 31,2019. There are many intricacies and possible refinements coming in the final regulations.

  • Jonathan McGuire
    August 14, 2019

    You have 180 days to reinvest the capital gains, including the date the gains are realized. If you sold an asset on Jan. 1, you would have 180 days, or June 27, as an "invest by date." If the gains are coming from a 1231 asset, then the 180-day period begins on the end of the tax year of the taxpayer. If you are receiving a K-1 with gain, your 180-day period could be the date of sale by the pass-through entity or the end of the tax year.

  • Pat Cardwell
    August 15, 2019

    Six months on initial cap gain investment.

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