Tax Reform Series 7 – Qualified Opportunity Zones & Treatment of Reinvested Capital Gains

Plain Language of Change:

  • Each state will designate opportunity zones (low-income census tracks) of up to 25% of the states low income communities by March 22, 2018
  • The designation will remain in effect for ten calendar years
  • A taxpayer may exclude a gain on the sale of property if the gain is reinvested in a qualified opportunity zone within 180 days of the sale or exchange
  • The gain is deferred until the earlier or when the property is sold or December 31, 2026
  • The amount of deferred income recognized depends on the period held. If held 5-7 years 90% of deferred gain is recognized, if held at least 7-10 years 85% of deferred gain is recognized
  • If the property is held at least 10 years then any additional gain above the recognized deferred gain are not taxed
  • See examples in detailed analysis below
  • Depending on the potential of the qualified opportunity zones we believe this may have significant benefit to our real estate and development clients
  • This seems preferential to a 1031 exchange, subject to the investment opportunity

Detailed Analysis of Qualified Opportunity Zone & Reinvested Capital Gains

Cordasco & Company PC is a boutique CPA firm specializing in federal and state tax issues. We provide customized tax and accounting services specifically designed to help our clients capitalize on the rapidly changing tax and accounting environments.

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