Final regulations provide flexibility to the taxpayer as to how to treat these. Now a taxpayer can invest an 1231 gain without the need to wait until year end to offset the gain with 1231 losses.
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What are the rules when it comes to section 1231 gains and the “netting” rule in OZs?
What are the rules when it comes to section 1231 gains and the “netting” rule in OZs?
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The netting rule only existed in the Proposed Regulations, which you can still use for 2019 gains. Under the final regulations, 1231 gain can be invested on a gross basis, but the December 31 start date for the 180-day timer no longer applies. Instead, the timer applies to 1231 gain as it does to any other type of capital gain.
No netting necessary.
This was "undone" in the Final Regulations. Now an investor can defer gains from a GROSS 1231 gain. They also no longer need to wait until the end of the tax year to make an investment. They now have the same option with the first day of the 180-day investment period as other capital gains.
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