In response to the Treasury’s guidance, the Polsinelli Opportunity Zone team hosted a webinar to provide commentary on the second round of Proposed Regulations. A summary of five key takeaways can be found below, with a link to the full webinar.
Five Key Takeaways
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Similar to traditional real estate deals, Qualified Opportunity Funds (QOF) are allowed to refinance developments and distribute excess cash to investors without immediate tax due.
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The Proposed Regulations are very favorable for operating businesses and encourages their establishment and growth in a qualified opportunity zone.
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Investors holding an investment in a QOF for at least 10 years (excluding funds organized as C corporations) will not have to pay tax if the QOF sells its assets, opening the door to multi-asset funds.
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Investors' opportunity zone benefits will not be jeopardized if the proceeds from an interim sale of a Qualified Opportunity Zone Business (QOZB) are reinvested within 12 months. However, investors will pay tax on the gain from the sale.
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The capital gain from the sale of real or depreciable property used in a trade or business, otherwise known as “1231 Property”, can only be invested in a QOF during the 180 days starting on the last day of the seller’s tax year. This differs from other qualified capital gains which have an investment timeline that runs 180 days from the date of sale.
