While it wasn’t obvious at the time, it’s now clear that the COVID-19-induced sell-off this past spring created one of the best stock buying opportunities of our lifetime—the S&P 500 is up nearly 65% from the low and the Nasdaq is up roughly 80% over the same time. The tectonic shift in our economy also set some stocks skyrocketing; as of January 31, 2021, Zoom is up 235%, Moderna is up 712%, and Tesla is up nearly 1,000%!1
Investing Substantial Stock Gains in a QOZ
The rapid recovery of the market has left many investors in the fortunate position of having substantial realized and unrealized capital gains. Many investors have taken gains and many, from a risk/planning perspective, are also holding positions with large unrealized gains that may become a larger—perhaps too large—allocation to a sector or security. For investors in either scenario with large realized or unrealized gains, a Qualified Opportunity Zone investment is probably a worthwhile consideration.
Investing in Qualified Opportunity Zones allows investors to:
QOZ investing has many compelling components, and the tax incentives including the deferral of gain certainly being one of them. The run-up of the stock market has created an opportunity for investors to investigate QOZ investing and consider if this may be a suitable solution for their financial situation. Generally, investors have 180 days from the date of their sale to invest gains in a Qualified Opportunity Zone.
Important QOZ Considerations
It is very important to note that a decision to invest gains into a Qualified Opportunity Zone need not be made prior to selling an asset. Additionally, the IRS has twice extended the time frame for QOZ investing due to the COVID-19 crisis.
In early 2021, the IRS issued a notice that investors whose last day of the 180-day investment period fell on or after April 1, 2020, and before March 31, 2021, will see their 180-day window extended to March 31, 2021. This signifies that investor gains dating back to October 2019 can now be invested in Qualified Opportunity Zone Funds.
What’s Next
If you have gains from the sale of stock or other assets, including the sale of a business, or you’re simply interested in learning more about Qualified Opportunity Zones, we are available and happy to set up a time to discuss them with you. We can also review the Qualified Opportunity Funds currently available to our clients. Simply give us a call at (224) 245-5281 or schedule a meeting. As with all tax related decisions we suggest consulting with your accountant regarding your personal situation.
1. Source: stockcharts.com