Welcome to the Answer Library from Ask Blue J, tax technology that delivers fast, verifiable answers to your tax questions using an extensive database of curated tax content and industry-leading generative AI technology. Click here to explore all questions and answers to your pressing tax questions.
Yes, you can defer 1231 gain for a taxable year under the Qualified Opportunity Zones (QOZ) rules. According to the IRS FAQ, you can elect to defer the amount of 1231 gain if the gain is invested in a Qualified Opportunity Fund (QOF) during the 180-day period that begins on the day the 1231 gain was realized. This deferral is applicable to gains realized in any taxable year, including those realized in 2019, where the 180-day period may begin on December 31, 2019.
The deferral mechanism is supported by § 1.1400Z2(a)-1 of the Internal Revenue Code, which allows eligible taxpayers to defer recognition of eligible gains by timely acquiring a qualifying investment in a QOF. The deferral applies to both capital gains and 1231 gains, provided the investment is made within the specified 180-day period.
For proper reporting of this gain deferral, taxpayers should refer to the instructions for Forms 8949 and 4797. This ensures that the deferral is correctly documented and compliant with IRS regulations.
Sources:
Instructions for Form 4684 (2023)
Does FIRPTA Apply to Investments in Opportunity Zones?
Notice 2019-42
§ 1.1400Z2(a)-1. Deferring tax on capital gains by investing in opportunity zones.