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As we approach the end of 2021 it is time for opportunity zone investors to get their Qualified Opportunity Funds (QOFs) and Qualified Opportunity Zone Businesses (QOZBs) in order to comply with the opportunity zone Regulations. Prior to year-end, QOFs and QOZBs must complete their semi-annual testing by December 31st and QOZBs must have their business plans and cash flow projections in place in order to comply with the Working Capital Safe Harbor provisions.
Following are 4 key action items required for most QOFs and QOZBs by year-end.
December 31st, 2021 is the last day for taxpayers to roll capital gains into a QOF and receive a 10% step-up in the tax basis of the QOF after a five-year hold. Capital gains will still be eligible to be rolled into QOFs through September of 2027 for certain taxpayers, however, the 10% basis increase will not be available unless Congress passes extension provisions.
Investors should also be aware of the QOF testing deadlines. For QOFs formed in 2021, the first testing deadline will be either December 31st, 2021, or if formed prior to June the testing date will be six months from the date the entity self-certified as a QOF. In the following years, the testing dates will be June 30th and December 31st for calendar year QOFs. It is important to work with your CPA by providing detailed balance sheets as these dates approach to ensure that at least 90% of the QOFs assets consist of Qualified Opportunity Zone Property (QOZBP).
For questions, please reach out to our OZ team:
Blake Christian, CPA/ MBT Partner
Office (435) 200-9262
Cell (562) 305-8050
Blake.Christian@hcvt.com
Gina Ballard, Principal
(562) 216-1809
Gina.Ballard@hcvt.com
Ryan Mark, Principal
(310) 566-6803
Ryan.Mark@hcvt.com
Alejandra Lopez Senior Manager
(562) 216-5516
Alejandra.Lopez@hcvt.com
Abi Yanke, Senior Staff Accountant
(435) 200-9267
Abi.Yanke@hcvt.com