Borde & Associates, P.A.: Were You Faced With Capital Gains in 2021 and/or 2022?
By Corrie Borde, Borde & Associates, P.A. // August 17, 2023
you may still be able defer or eliminate associated capital gains
Were you faced with capital gains in 2021 and/or 2022? If you have filed and/or paid capital gains on taxes for 2021 or 2022 tax returns you may still be able defer or eliminate associated capital gains.
The Deadline – September 11th, 2023
Eligible capital gains may include:
■ Stocks, bonds, options, hedge funds
■ Primary and secondary residences
■ Business, machinery, commercial buildings
■ Land, livestock, art, wine, automobiles
■ K1 Partnership gains
Capital gains recognized through a pass-through vehicle (Partnership or LLC) anytime last year, may still be eligible to participate in the Qualified Opportunity Zone (QOZ).
*A QOZ is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. Localities qualify as QOZs if they were nominated for that designation by a state, the District of Columbia, or a U.S. territory and that nomination was certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service (IRS).
Generally, to receive the QOZ Program tax benefits, an investor has 180 days from the date an asset is sold to invest a portion of the gain in a Qualified Opportunity Fund (“QOF”). However, the QOZ Program’s final regulations provided additional flexibility. This includes the ability of a partner to start their 180-day window on the date the partnership’s tax return is due, without extension (March 15th for a calendar year partnership).
DEFERRAL. Generally, if a taxpayer invests the capital gain from the sale of a qualifying asset into a QOF within 180 days of recognizing the gain, taxes on such proceeds may be deferred until the earlier of December 31, 2026** or when the QOF investment is sold.
ELIMINATION. Investors who hold their investment for at least ten years receive a step-up in basis which means they pay no tax on the appreciation of their QOF investment upon disposition or through 2047, whichever occurs first, regardless of the size of the potential profit. ***In addition, the step-up in basis eliminates any depreciation recapture tax that would otherwise be owed upon sale.
Due to the complexities of the QOZ Program, individuals considering an investment in a QOF should consult a qualified professional for financial, tax, and legal advice.
Please feel free to contact Borde & Associates, P.A. for more information HERE.
** A 10% step-up in basis was available for investments made prior to December 31, 2021 and an additional 5% step-up in basis was available for investments made prior to December 31, 2019.
*** Assumes that the investor is a resident of a state that conforms with the QOZ Program or a no state income tax state, otherwise the investor will owe tax on any realized gain in investor’s state.
Borde & Associates, P.A. and its affiliates are not CPA’s and/or tax professionals and are not endorsed by the IRS and as such do not provide tax, legal, or accounting advice. An investment in real estate carries certain risks including but not limited to a lack of liquidity and potential loss of principal. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting professionals before engaging in any transaction. The information herein is for educational purposes only. Securities and Advisory Services offered through KCD Financial, Inc. Member SEC/SIPC