November 28, 2021

Volume XI, Number 332

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A Significant Opportunity Zone Deadline Is Quickly Approaching

As has been the case over the last couple of years, opportunity zone (“OZ”) investments have been the subject much interest from taxpayers and investors during 2021. This interest has led to the investment of significant amounts of capital into OZ projects throughout the country. Interest in the OZ program has been driven in large part by three potential tax federal tax benefits available to OZ investors, including:

  1. Deferral of tax on the capital gain income invested into a qualifying opportunity fund (“QOF”) until December 31, 2026;

  2. Permanent exemption from tax on 15% of capital gain income invested into a QOF and held for at least 7 years by (or permanent exemption from tax on 10% of capital gain income invested into a QOF and held for at least 5 years) by December 31, 2026; and

  3. Permanent exemption from tax on gains realized upon the exit of an OZ investment held for at least 10 years. 

While current law provides taxpayers with the potential opportunity to qualify for the tax benefits noted in clauses (1) and (3) above with respect to qualifying investments made into a QOF as late as December 31, 2026, the deadline for investors seeking to qualify for the tax benefit described clause (2) above will soon be expiring. Specifically, although the 15% exemption is no longer available with respect to investments into a QOF made after December 31, 2019, the 10% exemption is still available to taxpayers and investors that make qualifying investments into a QOF by December 31, 2021. If you currently have eligible capital gain income and are interested in taking advantage of the 10% exemption, now is the time to act.

© 2021 Winstead PC.National Law Review, Volume XI, Number 280
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About this Author

Brandon Jones Tax Attorney Winstead Fort Worth
Shareholder

Brandon Jones is a member of Winstead’s Tax Practice Group. With almost 20 years of experience, Brandon spends most of his time assisting and advising closely-held and family-owned businesses and private equity clients in connection with (i) the formation of their business entities including drafting and negotiating the related governing documents, (ii) structuring and restructuring their investment and business holdings and operations (for asset protection, income tax planning, estate planning, and other commercial purposes), (iii) corporate governance matters, and (iv...

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