More Time Granted to Reinvest and Receive a Tax-break
Investors Receive an Extension and a Tax Break Due to COVID-19
The IRS has recently announced its plan to give investors more time and a tax break due to the effects of Coronavirus. The original deadline to reinvest into a qualified opportunity fund, April 1, 2020, was moved to the end of the year, December 31, 2020. This not only gives investors more time to analyze their investments, but it also will lead to a larger tax break in the long run. However, this opportunity was not built for everyone.
Those who slowed their investments due to Coronavirus, and are carefully choosing which qualified opportunity fund to invest in will likely have a break coming their way. IRS implemented Notice 2020-23, that states, “ If the last day of the 180-day investment period within which a taxpayer must make an investment in a QOF in order to satisfy the 180-day investment requirement falls on or after April 1, 2020, and before December 31, 2020, the last day of that 180- day investment period is postponed to December 31, 2020.” This notice is already in effect, and qualifying investors will see the tax break in the coming months.
The Great Tax Break
The plan was created to give the investors who hold their funds in a QOF for long periods of time a larger tax break in the end. If the taxpayer remains in their QOF fund for at least 5 years, they will be able to invest their capital gains into economically distressed communities, which will give them a large tax break at the end. If an investor holds their funds for at least 10 years, no taxes will be owned upon selling stake on any of the appreciated funds.
A tax break may sound enticing in this state of affairs but Notice 2020-23 was not implemented for everyone to use. Many of the investments are based on real estate. However, this tax break is a long-term strategy aimed at Coronavirus recovery plans.
Investors who do not have an accountant or financial advisor while making these investments may face tax-planning consequences. If you are unsure about what actions you should be taking, reach out to our representatives today.
For more information regarding Notice 2020-23 and the IRS Relief for Qualified Opportunity Funds visit https://www.irs.gov/pub/irs-drop/n-20-39.pdf.