Only capital gains (long or short) or 1231 net gains.
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Can any source of capital be used to invest in a QOF or is it only capital gains that are eligible for the tax advantages?
Would you please clarify?
Answers
Only capital gains are eligible to the special tax benefits of IRC 1400Z-2 (special rules for capital gains invested in Opportunity Zones). In the case of any investment in a QOF which includes both capital gain and other funds, the investment will be treated as two separate investments, one of which includes the invested gain and the other of which includes all other funds. See: 26 USC Sec. 1400-2 (e). Treatment of Investments with Mixed Funds.
Only capital gains timely rolled over qualify for the tax advantages.
Investment in a fund can be of any funds. However, the benefits are directly tied to investment of deferred capital gains.
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