Where new investments, under certain conditions, may be eligible for preferential tax treatment.
Under the program, an investor can defer capital gains tax on realized gains if the gains are invested in a Qualified Opportunity Fund within180 days of the sale.
Twelve percent of US census tracts are Opportunity Zones (8,762 tracts). Governors of the 50 states and 4 territories and the mayor of Washington, DC, nominated the zones, which were officially designated by the US Department of the Treasury. The designated zones have lower incomes, higher poverty rates, and higher unemployment rates than eligible non-designated tracts.
Investors can place existing assets with accumulated capital gains into Opportunity Funds they’re not taxed until the end of 2026 or when the asset is disposed of.
For capital gains placed in Opportunity Funds for at least 5 years, investors’ basis on the original investment increases by 10 percent.
For investments held for at least 10 years, investors pay no taxes on any capital gains produced through their investment in Opportunity Funds.
Initially, the tax basis is deemed to be zero. However, if the Opportunity Fund investment is held for at least 5 years, the basis is increased to 10 percent of the deferred gain.
Finally, if the Opportunity Fund investment is held past December 31, 2026, the investor will be deemed to realize the deferred capital gains as of December 31, 2026. In addition, will pay capital gains tax on the amount of recognized gains as of that date (determined as described above, with basis adjustments if applicable).
The basis is then adjusted to equal the amount of the original Opportunity Fund investment. Finally, if the investor holds the Opportunity Fund investment for at least 10 years, the basis is deemed to be the fair market value of the Opportunity Fund investment and no capital gains tax will apply to the appreciation on the Opportunity Fund investment.
What are opportunity zones?
Opportunity zones are currently being designated by the governors of each state. Each state may designate 25% of the eligible census tracts in their state. As of right now, all 50 states and Puerto Rico have submitted and have been approved for designated Opportunity Zones.
Are all designated opportunity zones distressed?
No. Opportunity zones must meet certain criteria to qualify. Census tracts with over 20% poverty and median family income no greater than 80% of the area medium will qualify. There are also contiguous zones, which are census tracts that are adjacent to a designated opportunity zone, and also do not exceed 125% of the median family income of that same opportunity zone.
What is the process?
Individuals who are realizing a capital gain across all asset classes can invest those monies on a tax deferred basis, as long their gain is invested in a qualified opportunity fund within 180 days of the sale or exchange. The process is very easy. Agree to subscription agreement, transfer funds, receive stock certificate and tax statement. The whole process is usually completed within 48 to 72 hours.
In certain situations where an individual is facing the expiration of the 180 day window we can expedite the process to same day.
What are the investment restrictions?
The capital gains must be invested in qualified opportunity funds that have 90% of their assets invested in qualified opportunity zones. Non capital gain money can be invested into opportunity funds however there would not step up in tax basis benefits for earnings of non capital gain money.
How do I qualify?
All capital gains on the sale or or exchange of any property to an unrelated party invested within 180 days are eligible for the tax benefits.
What is the minimum investment amount?
The minimum investment is $200,000.
Can I put 1031 money into an opportunity fund?
Yes. Opportunity Funds are designed to be easier with less hassle than 1031 Exchanges.
What can I invest in?
Qualified opportunity stock, partnership interest, or business property are all eligible investments. The Fund is qualified opportunity stock only. Meaning you are investing in the entire interest of the fund and its holdings.
How do I invest?
Investors can invest in opportunity funds by selling an asset and triggering a capital gain, then subsequently placing that gain in a qualified opportunity fund with 180 days of the original sale. There is a subscription agreement that is signed by the investor and a wire transfer agreement. This is then followed by an execution of the agreement with a wire transfer into opportunity fund account.
What is the investment rollover period?
Investors have 180 days to invest realized capital gains.
Do I use an intermediary like I would with a 1031 exchange?
No. You can take receipt of the gains, as long as you reinvest within 180 days. As an Opportunity Fund we have to certify with the IRS. You receive a tax statement at the end of the year.
Do I have to pay original deferred taxes?
In part. The original taxes are deferred until December 31, 2026 (or the date of a sale, whichever is earlier). Investors will have to recognize a portion of the deferred gains that year. Investors may benefit from the step up in basis at years 5 (10%) and 7 (another 5%) if they reach either holding period before December 31, 2026.
Can I put new money into an opportunity fund?
New monies can be invested in an opportunity fund, however the investor would not enjoy the same tax benefits as realized capital gains.
What happens if the investment fails?
Investments made by the Fund are made within Opportunity Zones. While all the care is taken to ensure sufficient due diligence is done prior to investment, these investments are subject to risks. Startups have a high success rate but these also come with intrinsic risks associated with markets & other factors.
Phone:
(302) 276-8253
(848) 236-8650
Email:
This Fund is 3rd Party Administered By OZ Invested