{"id":7073232,"date":"2026-10-02T18:41:12","date_gmt":"2026-10-02T18:41:12","guid":{"rendered":"https:\/\/fivemor.com\/?p=7073232"},"modified":"2026-10-02T18:41:12","modified_gmt":"2026-10-02T18:41:12","slug":"planning-for-your-qualified-opportunity-fund-gain-inclusion","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=7073232","title":{"rendered":"Planning for Your Qualified Opportunity Fund Gain Inclusion"},"content":{"rendered":"


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The end of 2026 will arrive faster than many Opportunity Zone<\/a> investors expect\u2014and with it, the mandatory recognition of previously deferred capital gains. Under current law, taxpayers who reinvested eligible gains into a Qualified Opportunity Fund (QOF) must recognize those deferred gains no later than December 31, 2026. This applies regardless of when the original investment was made, making the coming year a critical period for proactive planning.<\/p>\n

As that inclusion date approaches, investors face a potentially significant tax liability\u2014often without corresponding liquidity, since the investment may still be held for the purpose of achieving the program\u2019s 10\u2011year exclusion benefit. As a result, there is often a need for strategic planning to reduce or offset this inclusion amount before it hits tax returns in 2026 and tax bills in 2027.<\/p>\n

Below, we outline three planning techniques that may help mitigate the impact of the upcoming inclusion event. Each involves nuance, and none applies universally\u2014another reason early conversations with your Perkins advisor are essential.<\/p>\n

1. Tax Loss Harvesting: Coordinate Early With Your Financial Advisor<\/h2>\n

One widely discussed strategy for managing the 2026 gain recognition is tax loss harvesting. Losses realized in 2026 may offset the capital gain recognized from your QOF investment, reducing your taxable income for that year. Advisors emphasize harvesting losses in the same year as the inclusion event, since the deferred gain will be recognized as a 2026 tax item, with payment generally due in April 2027.<\/p>\n

This is a conversation that should begin sooner rather than later. Asset mixes, market conditions, and portfolio strategy all dictate whether tax loss harvesting is viable\u2014and whether opportunities exist to realize losses without disrupting long\u2011term investment goals.<\/p>\n

2. Cost Segregation Studies on Underlying QOF Real Estate<\/h2>\n

For QOFs that invest directly in real estate, cost segregation<\/a> studies may help generate additional depreciation deductions. These deductions can potentially offset taxable income recognized within the fund, thereby improving after\u2011tax returns or reducing taxable income flowing to investors.<\/p>\n

While depreciation deductions at the fund level do not directly offset the investor\u2019s 2026 deferred gain recognition, they can meaningfully affect the overall economic picture. Determining whether cost segregation is an effective strategy is nuanced and requires analysis both of the Fund level, as well as investor profile.<\/p>\n

3. Business or Asset Valuations: Leveraging the \u201cLesser Of\u201d Rule<\/h2>\n

One of the most nuanced planning opportunities relates to how the gain inclusion amount is calculated. By statute, investors recognize the lesser of:<\/p>\n