We are thrilled to announce that Prestige Accounting Services Group (previously Prestige Wealth Accounting Group) has joined forces with Bacchetta & Company in an exciting new partnership!

IRS Extends the Opportunity to Defer Capital Gains

Article Highlights:

  • Tax Benefits 
  • Investment Period 
  • Qualified Opportunity Zone Funds 
  • Qualified Opportunity Zones 
  • Deferral Period 
  • 10 Year Election 
As part of tax reform put into place a couple of years ago, individuals are able to defer both short- and long-term capital gains into what are referred to as Qualified Opportunity Zone Funds (QOFs). What is nice about this is that only the actual amount of gain needs to be invested into a QOF to avoid taxes on the gain for the sale year. The gains invested in a QOF are deferred until you cash out of the QOF investment or December 31, 2026, whichever occurs first.

This includes the gain from the sale of all capital assets, such as stocks or bonds, property, rentals, land, and even partnership interests.

Example: You sell 1,000 shares of stock that cost you $20 a share (a total cost of $20,000). You were very fortunate, and the stock had appreciated to $100 a share when you sold them, for a total sales price of $100,000 and a capital gain of $80,000. If you invest the $80,000 gain in a QOF within the required 180 days, the gain on the sale and the tax on the gain are postponed.

Example: Another example would be if you had inherited vacant land several years ago, and the fair market value of the land at the time you inherited it was $50,000. This year, a grocery chain wants to build a grocery store on the land and purchases it from you for $300,000. As a result of the sale, you have a gain of $250,000 ($300,000 - $50,000). If you invest that $250,000 gain in a QOF within the required 180-day period, you can defer the gain and the tax on the sale.

Investment Period Extended – Normally, to defer the taxable gain into a QOF, the profit must be reinvested into a QOF within 180 days of the sale date. Because of the business disruption caused by the COVID-19 pandemic, the IRS has provided relief for the 180-day investment period requirement. That relief gives those whose 180-day reinvestment period would have ended on or after April 1, 2020 and before December 31, 2020 until December 31, 2020 to invest that gain into a QOF.

Qualified Opportunity Funds – A QOF is an investment vehicle organized as a corporation or partnership for the purpose of investing in qualified opportunity zone property acquired after December 31, 2017. The fund must hold at least 90% of its assets in a qualified opportunity zone property. Visit the IRS’s Opportunity Zones Frequently Asked Questions for more details related to QOFs.

Qualified Opportunity Zones (QOZs) are population census tracts that are low-income communities specifically designated as QOZs after being nominated by the governor of the state or territory in which the community is located. For more details on QOZs, visit the Treasury Department’s Opportunity Zones Resource Page.

Deferral Period – The gain income is deferred until the earlier of the date the investment in the QOF is sold or December 31, 2026. If a taxpayer continues to hold their QOF investment after December 31, 2026, the taxpayer still has to include the deferred gain in their 2026 tax return. If that is the case, the gain reported in 2026 adds to the basis of the QOF. To the extent the QOF is purchased with the deferred gain, the basis of the QOF is zero (because it is untaxed gain). Then, when the QOF is sold, the deferred gain subject to tax is the excess of the lesser of (a) or (b) over the QOF’s basis (or enhanced basis [explained next], if applicable): (a) The deferred gain, or (b) The fair market value of the QOF as determined at the end of the deferral period.

Enhanced Basis – Initially, as noted above, when the QOF is purchased with deferred capital gain income, the basis of the QOF is zero. Depending on how long the taxpayer holds their investment in the QOF, the basis may be increased by up to 15% of the gain income originally deferred.

10-Year Election – If the QOF is held for 10 years or longer before it is sold, the taxpayer can elect to increase the basis to the fair market value amount. The effect of this adjustment is that none of the appreciation since the QOF was purchased is taxable when it is sold. This provision applies only to the investment in the QOF made with deferred capital gains.

QOFs provide a unique opportunity, but there are investment risks, and it is important to investigate a QOF’s investment strategies carefully to see if the investment is suitable for your needs. Please call this office for information about how a QOF might work for your particular set of tax-related circumstances.

Share this article...

More About Us

Get to Know Prestige Accounting Services Group (previously Prestige Wealth Accounting Group)

Offices in Flemington, NJ and Califon, NJ

Our Mission: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we are on a mission to redefine the tax experience for individuals and small businesses. With a focus on personalized service, strategic planning, and expert guidance, we aim to empower our clients to succeed financially with confidence and ease.

Expertise in Action: With a wealth of experience and a team of dedicated professionals, we specialize in individual and small business tax preparation. While we excel in all areas of taxation, our passion lies in serving the unique needs of small business owners in New Jersey. We understand that small business taxation requires specialized knowledge and attention to detail, which is why we go above and beyond to ensure our clients receive the guidance and support they deserve.

Tailored Solutions for Every Client: Whether you're a high-net-worth individual seeking comprehensive tax planning or a small business owner in need of accounting and bookkeeping assistance, we have the expertise to meet your needs. Our team takes the time to understand your specific situation and develop customized solutions that align with your goals and objectives.

Why Choose Us?: What sets us apart from other New Jersey tax firms is our commitment to excellence and innovation in the field of taxation. We don't just prepare tax returns; we provide strategic insights, proactive planning, and actionable advice to help our clients achieve their financial goals. With a team of two CPAs, an EA, and an ERO, we have the expertise and resources to deliver exceptional service and results.

Your Success is Our Priority: At Prestige Accounting Services Group (previously Prestige Wealth Accounting Group), we measure our success by the success of our clients. We are dedicated to building long-lasting relationships, providing unparalleled service, and helping our clients thrive in today's ever-changing tax landscape.

We can't wait for you to experience the Prestige Accounting Services Group (previously Prestige Wealth Accounting Group) difference.

Tax & Small Business Updates

Get the latest in tax and small business updates and issues that affect your finances and growth prospects.

I confirm this is a service inquiry and not an advertising message or solicitation. By clicking “Submit”, I acknowledge and agree to the creation of an account and to the and .
I consent to receive SMS messages

Flemington Office

Looking for tax help in Flemington, NJ? You can find us at:

Millburn Office

Looking for tax help in Millburn, NJ? You can find us at:

Califon Office