What is the process?
Clients realizing a capital gain may invest that gain on a tax deferred basis, as long as the gain is invested in a qualified opportunity fund within 180 days of the sale.
Are there investment restrictions?
Capital gains must be invested in a qualified opportunity fund that has 90% of its assets in qualified opportunity zones.
What are the qualifications to invest?
All capital gains invested within 180 days are eligible for the opportunity zone tax benefits.
What is the minimum amount to invest?
The minimum investment will typically range from $25,000 - $50,000 depending on the fund chosen.
Is 1031 money eligible?
How long is the investment period?
A five year hold provides the investment a 10% stepped up basis. A 7 year hold provides an additional 5% stepped up basis, totaling 15%. After 10 years permanent deferral of capital tax on any gains from the opportunity fund investment is achieved.
Do I have to pay the original deferred taxes?
Partially. The original taxes are deferred until December 31, 2026 (or the date of sale, whichever is earlier). The investor must recognize a portion of the deferred gains that year, however, the investor may recognize a benefit from the step up in basis: 10% at year 5 and another 5% at year 7 if they reach either holding period before December 31, 2026.
Can I put in money other than capital gains?
Yes, however it would not receive the same tax benefits as realized capital gains.
What happens to my money if a project fails?
Real Estate investments are speculative in nature and these investments carry that same risk. Investors risk losing all Capital invested returns. However the funds 10 year investment period allow a greater chance of the investment living through a market cycle and allows the manager flexibility and maneuverability during market fluctuations.
Opportunity Zone Investing FAQ
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