IRC Section 1231 | TaxConnections

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SAVVY TAXPAYERS ARE TRANSFORMING BUSINESS GAIN TAXATION LEAD INTO GOLD. THEIR APPROACH IS FAR FROM “ORDINARY”.

Key Takeaways

Treasury and IRS initially struggled regarding how to deal with IRC Section 1231 gains and losses in the context of the OZ program; however, the final OZ Regulations ended up being extremely taxpayer-friendly.
Understanding how and why Treasury arrived at its decision unlocks a remarkable, yet brief, planning opportunity for taxpayers and their advisors.
With the right planning, taxpayers can isolate gross 1231 gains for OZ reinvestment eligibility but still claim gross 1231 losses in the same year at ordinary income rates – resulting in permanent tax savings.
Taxpayers who already reported net 1231 gains in tax years 2019 and 2020 can still likely make tax-advantaged QOF investments for those years—but the window is closing fast – especially for 2019 1231 gains.
This ability to defer 1231 gain and recognize 1231 losses can further benefit certain taxpayers who would have otherwise been forced to pay ordinary rates on net 1231 gains in a given year as a result of the five-year “look-back” period under 1231(c).

Written by Blake Christian | Posted in IRC Section 1231 • Opportunity Zone

SAVVY TAXPAYERS ARE TRANSFORMING BUSINESS GAIN TAXATION LEAD INTO GOLD. THEIR APPROACH IS FAR FROM “ORDINARY”.

Key Takeaways

Treasury and IRS initially struggled regarding how to deal with IRC Section 1231 gains and losses in the context of the OZ program; however, the final OZ Regulations ended up being extremely taxpayer-friendly.
Understanding how and why Treasury arrived at its decision unlocks a remarkable, yet brief, planning opportunity for taxpayers and their advisors.
With the right planning, taxpayers can isolate gross 1231 gains for OZ reinvestment eligibility but still claim gross 1231 losses in the same year at ordinary income rates – resulting in permanent tax savings.
Taxpayers who already reported net 1231 gains in tax years 2019 and 2020 can still likely make tax-advantaged QOF investments for those years—but the window is closing fast – especially for 2019 1231 gains.
This ability to defer 1231 gain and recognize 1231 losses can further benefit certain taxpayers who would have otherwise been forced to pay ordinary rates on net 1231 gains in a given year as a result of the five-year “look-back” period under 1231(c).