San Diego San Diego

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Opportunity zone investors are getting some slack during thepandemic. The 180-day deadline for investors to place capital gainsin a qualified opportunity zone fund—and therefore avoid capitalgains taxes—has been extended to July 15, if the deadline fellduring the pandemic from April 1 to July 1.

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"For the first time, time sensitive actions include the periodof time to invest eligible gains in a qualified opportunity fund,"Phil Jelsma, a partner and chair of the taxpractice team at Crosbie Gliner Schiffman Southard &Swanson, tells GlobeSt.com. "In general, these new rulesdo not apply to all potential capital gains—only assets disposed ofbetween October 4, 2019 and January 17, 2020.This extension could also provide QOFs with additional time to meettheir deadlines."

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The pandemic is the first time in US history that there has beena national emergency declaration through FEMA. The action prompteda national response to federal programs like opportunity zonefunds, and other deadlines are likely to be impacted as well."Since the federally declared disaster area applies to all 50states, the normal 30-month time period for working capital to bedeployed by a qualified opportunity zone Business may also beextended," says Jelsma.

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New deadlines could give investors 24 months to utilize workingcapital in a declared disaster area. "The final Opportunity Zoneregulations provide that a qualified opportunity zone business mayreceive up to 24 months to utilize its working capital assetswithin a federally declared disaster area. This suggests thatqualified opportunity zone businesses can receive an extension forworking capital safe harbor but not for a period of over 24 months.The 24-month period is not an automatic extension, but means theIRS may elect to grant additional time," says Jelsma.

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Another extension could apply to the 12 months deadline toacquire a replacement asset in a qualified opportunity zone fund."The qualified opportunity zone disposes of an asset, it generallyhas 12 months to acquire another asset in a qualified opportunityzone. Similar to the point earlier, the final regulations suggestthis period may be extended within a federally declared disasterarea providing that a QOF may receive up to an additional 12 monthsbut it does not appear to be an automatic extension," saysJelsma.

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Despite the extension to deadlines, the pandemic could continueto have an impact on the viability of opportunity zone investments."The overwhelming uncertainty pervading today's real estate marketis mitigating their appeal," says Jelsma. The majority ofopportunity zone transactions have hit the pause button whilebusinesses close their doors and investors quarantine in responseto shelter in place mandates. Most lenders and underwriters havebeen unwilling to move forward until there is some clarity as tothe general direction of the economy. As a result, many opportunityzone deals are on hold."

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Kelsi Maree Borland

Kelsi Maree Borland is a freelance journalist and magazine writer based in Los Angeles, California. For more than 5 years, she has extensively reported on the commercial real estate industry, covering major deals across all commercial asset classes, investment strategy and capital markets trends, market commentary, economic trends and new technologies disrupting and revolutionizing the industry. Her work appears daily on GlobeSt.com and regularly in Real Estate Forum Magazine. As a magazine writer, she covers lifestyle and travel trends. Her work has appeared in Angeleno, Los Angeles Magazine, Travel and Leisure and more.