Both 1231 gains and short- and long-term capital gain may be invested in an OZ fund and receive a deferral. The ability to defer 1231 gains was considered a gift in the regulations by many.
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What is the definition of "qualified 1231 gains" that can be deferred if invested in an OZ?
What is the definition of "qualified 1231 gains" that can be deferred if invested in an OZ? What doesn't qualify?
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Net section 1231 gains come from any property used productively in a trade or business. The most prominent exception (that is NOT OZ-eligible) is inventory. In real estate, inventory includes co-op sponsor units, unsold condo inventory, fix-and-flip properties, or single-family residential lots held by a developer.
All gross 1231 gains qualify. No netting is required.
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