-Published: Monday, December 30, 2019-
IRS and Treasury finalize opportunity zone guidance
By the A.M. Costa Rica wire services
The Internal Revenue Service issued final regulations providing details about investment in qualified opportunity zones. This gives investors the chance to defer paying taxes immediately on capital gains generated in the zones.
The final regulations modified and finalized the proposed regulations that were issued Oct. 28, 2018 and May 1, 2019.
Qualified opportunity zones were created by the 2017 Tax Cuts and Jobs Act, the I.R.S. said. These zones are designed to spur economic development and job creation in distressed communities throughout the country and U.S. possessions by providing tax benefits to investors who invest eligible capital into these communities, it added. Taxpayers may defer tax on eligible capital gains by making an appropriate investment in a qualified opportunity fund and meeting other requirements, the agency said.
According to the IRS, the final regulations provide additional guidance for taxpayers eligible to make an election to temporarily defer the inclusion in gross income of certain eligible gain. The final regulations also address the ability of such taxpayers' eligibility to increase the basis in their qualifying investment equal to the fair market value of the investment on the date that it is sold, after holding the equity interest for at least 10 years.
“The statute permits the deferral of all or part of a gain that would otherwise be included in income, if corresponding amounts are invested into a qualified opportunity fund, known as QOF. The gain is deferred until an inclusion event or Dec. 31, 2026, whichever is earlier,” said the IRS in its statement.” The final regulations provide a list of inclusion events. Further, the final regulations provide guidance to determine the amount of income that must be included at the time of the inclusion event or Dec. 31, 2026.”
The final regulations also address the various requirements that must be met to qualify as a qualified opportunity fund, as well as the requirements an entity must meet to qualify as a qualified opportunity zones business.
According to the IRS, in order to provide clarity, the final regulations have modified the proposed regulations for such funds and qualified opportunity zones businesses.
Specifically, the final regulations provide additional guidance on how an entity becomes eligible and the requirement that a fund or zone entity engage in a trade or business.
The final regulations retain the general approach of the proposed regulations but provide additional guidance and clarity to the rules regarding business property kin these zones, the I.R.S. said.
Related forms, instructions and other information taxpayers need to take advantage of this update will be made available in January, said the IRS.
More information about this provisions can be reached at IRS site.
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Did you know about the possibility of deferral of all or part of a gain that would otherwise be included in the income tax report? We would like to know your thoughts on this story. Send your comments to news@amcostarica.com.
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