IRS Extends Reliefs For Qualified Opportunity Funds
The IRS has been busy on the COVID front, extending reliefs available for qualified opportunity funds (QOFs), in response to the pandemic.
Opportunity zones, created by the 2017 Tax Cuts and Jobs Act, are designed to spur investment in distressed communities through tax benefits. Opportunity zones retain their designation for 10 years and investors may defer tax on almost any capital gain up to December 31, 2026, by making an appropriate investment in a zone, making an election after December 21, 2017, and meeting other requirements.
The regulations allow the deferral of all or part of a gain that is invested into a QOF that would otherwise be includible in income. The gain is deferred until the investment is sold or exchanged, or until December 31, 2026, whichever is earlier. If the investment is held for at least 10 years, investors may be able to permanently exclude gain from the sale or exchange of an investment in a QOF.
Taxpayers who sell property for an eligible gain and who would have had 180 days to invest in a QOF to defer that gain have been granted extra time owing to the COVID-19 pandemic.
The tax authority also issued guidance on how employers who elected to defer certain employees’ taxes can withhold and pay the deferred taxes throughout 2021 instead of in just the first four months of the year.
For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look