Qualified Opportunity Funds: Gifts, Death or Divorce

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 defer gains by making an investment in a qualified opportunity fund must recognize the deferred gain immediately upon the gifting of that investment to another taxpayer.  Such deferred gains must also be recognized immediately if the investment is transferred to a former spouse as part of a divorce.

However, the regulations confirm that the death of the taxpayer does not accelerate the date on which the deferred gain must be recognized.