Deferring Those Capital Gains Taxes Once upon a time, you could have deferred capital gains taxes from the sale of that stock through use of a 1031 exchange. This means only capital gains from the sale of real estate for investment or business purposes are eligible for this tax-deferral strategy.

What does it mean to defer capital gains?

What Does Tax-Deferred Mean? Tax-deferred status refers to investment earnings—such as interest, dividends, or capital gains—that accumulate tax-free until the investor takes constructive receipt of the profits.

Is there a way to defer capital gains?

The IRS extended the opportunity to defer capital gains. Individuals can now defer both short- and long-term capital gains into Qualified Opportunity Zone Funds (QOFs). This is a part of the tax reform put into place a couple of years ago.

Can a Qualified Opportunity fund defer a capital gain?

IF YOU SELL ANY PROPERTY FOR CAPITAL GAIN AND INVEST IN A QUALIFIED OPPORTUNITY FUND WITHIN 180 DAYS Capital Gain. The statute allows deferral of any “gain.” By its terms it is not limited to “capital” gain. Read literally, that could include gain recognized on the sale of property that is taxed as ordinary income, such as inventory.

What kind of gains can be deferred for tax purposes?

A13. Gains that may be deferred are called “eligible gains.” They include both capital gains and qualified 1231 gains, but only gains that would be recognized for federal income tax purposes before January 1, 2027, and that are not from a transaction with a related person.

When to invest capital gains into a QOF?

Now the date to invest that gain into a QOF is December 31, 2020. 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.