The TCJA added Code Subchapter Z, §§ 1400Z-1 and 1400Z-2, effective December 22, 2017. Under Subchapter Z, Taxpayers may elect to defer gain from the sale or exchange of property to an unrelated party by reinvesting that gain within 180 days of the sale or exchange in a "qualified opportunity fund," which is defined as an investment vehicle organized as a corporation or partnership for the purpose of investing in "qualified opportunity zones." The Code defines qualified opportunity zones as population census tracts that are low income communities nominated by a state governor and designated by the U.S. Treasury as qualified opportunity zones. The deferred federal gain must be included in income upon the earlier of (i) the tax year in which the taxpayer's investment in the qualified opportunity fund is sold or exchanged, and (ii) tax year 2026, if the taxpayer's investment in the qualified opportunity fund is not sold or exchanged by December 31, 2026. In either case, the amount of gain includable in the taxpayer's federal gross income is the excess of: the amount of gain excluded or the fair market value of the investment in the qualified opportunity fund, whichever is less, over the taxpayer's federal basis in the investment. For Massachusetts corporate excise purposes, the gain will be similarly determined. See TIR 19-7 for more information.
Origin: IRC § 1400Z-1, 2
Corporate Excise Tax
Deferrals of Gross Income
2.102
Deferral of Gain Invested in Qualified Opportunity Zones
The TCJA added Code Subchapter Z, §§ 1400Z-1 and 1400Z-2, effective December 22, 2017. Under Subchapter Z, Taxpayers may elect to defer gain from the sale or exchange of property to an unrelated party by reinvesting that gain within 180 days of the sale or exchange in a "qualified opportunity fund," which is defined as an investment vehicle organized as a corporation or partnership for the purpose of investing in "qualified opportunity zones." The Code defines qualified opportunity zones as population census tracts that are low income communities nominated by a state governor and designated by the U.S. Treasury as qualified opportunity zones. The deferred federal gain must be included in income upon the earlier of (i) the tax year in which the taxpayer's investment in the qualified opportunity fund is sold or exchanged, and (ii) tax year 2026, if the taxpayer's investment in the qualified opportunity fund is not sold or exchanged by December 31, 2026. In either case, the amount of gain includable in the taxpayer's federal gross income is the excess of: the amount of gain excluded or the fair market value of the investment in the qualified opportunity fund, whichever is less, over the taxpayer's federal basis in the investment. For Massachusetts corporate excise purposes, the gain will be similarly determined. See TIR 19-7 for more information.
IRC § 1400Z-1, 2
5.3
8.9
9.5
9.0
9.4
