Opportunity Funds and Installment Sales

As discussed on pages 64 to 66 of the Tax Year 2019 M+O=CPE Individual Tax Year-End Workshop Reference Book, taxpayers with capital gains can defer the recognition of those gains by reinvesting the amount of the gain into a qualified opportunity fund. 

On December 19, 2019, the Treasury Department issued final regulations related to investing in qualified opportunity funds.  (See Treasury Decision 9889.)  Those regulations confirm that taxpayers who recognize gains under the installment sale method are eligible to defer those gains by investing in a qualified opportunity fund, even if the taxpayer entered the installment sale prior to 2018. 

The regulations also indicate that, for the purpose of the 180-day investment requirement, a taxpayer can elect to choose the 180-day period to begin on either the date a payment under the installment sale is received or the last day of the taxable year in which the payment occurs. 

In addition, the final regulations indicate that taxpayers who receive long-term capital gain distributions from mutual funds are also eligible to elect to defer such gains by investing in qualified opportunity funds.  Generally, the 180-day investment requirement is measured from the last day of the taxable year, unless the mutual fund itself has elected otherwise.