The IRS today updated a list of “frequently asked questions” (FAQs) concerning opportunity zone measures under the new tax law (Pub. L. No. 115-97, enacted December 22, 2017).
The list of opportunity zones FAQs on the IRS website indicates the FAQs were updated on June 7, 2018, to include the following new FAQs:
Q. I sold some stock on December 15, 2017, and, during the required 180-day period, I invested the amount of the gain in a Qualified Opportunity Fund. Can I elect to defer tax on that gain?
A. Yes, as long as it was invested in the 180-day period, under § 1400Z-2(a)(1) of the Internal Revenue Code, you may elect to defer the tax on that gain. A deferral election may be made on your 2017 Federal Income Tax return. Information about the sale of your stock is required to be included in that return using IRS Form 8949. Precise instructions on how to use that form to elect deferral of the gain for your 2017 return will be forthcoming shortly.
Q. Can I still elect to defer tax on that gain if I have already filed my 2017 tax return?
A. Yes. You may elect to defer the gain, but you will need to file an amended 2017 return. As part of that amended return, you will follow the election procedure described in the answer to the preceding question.
Q. I have comments that I would like to make on § 1400Z-2. How can I share those comments with the IRS?
A. Please send all comments to CC.ITA.Section.email@example.com.
The new U.S. tax law (Pub. L. No. 115-97) generally provides for the temporary deferral of inclusion in gross income on gains reinvested in a qualified opportunity fund and the permanent exclusion of gains from the sale or exchange of an investment held for at least 10 years in a qualified opportunity fund.
The IRS in February 2018 issued Rev Proc. 2018-16 as guidance to the “chief executive officers” of any U.S. state, U.S. possession, and the District of Columbia regarding the procedure for designating population census tracts as qualified opportunity zones for purposes of sections 1400Z–1 and 1400Z–2 as added to the Code by the new tax law. Read TaxNewsFlash
As noted in an April 2018 release from Treasury, qualified opportunity zones retain this designation for 10 years. Investors can defer tax on “any prior gains” until no later than December 31, 2026, provided that the gain is reinvested in a qualified opportunity fund. Also, if the investor holds the investment in the qualified opportunity fund for at least 10 years, the investor would be eligible for an increase in its basis, in an amount equal to the fair market value of the investment on the date that it is sold.
It is not clear whether Treasury’s use of the words “any prior gains” in the April 2018 release is intended to signal that pre-enactment gains and gains other than capital gains may be eligible for this deferral.
For more information, contact a tax professional with KPMG’s Washington National Tax:
Susan Reaman | + 1 202-533-3541 | firstname.lastname@example.org
© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.