REVITALIZE THE COUNTRY & BUILD WEALTH

OPPORTUNITY ZONES

Opportunity Zones aims to connect low-income communities with much needed capital.

IN A NUTSHELL:

Opportunity Zones offer a new, exciting and important investment vehicle within the United States.  Opportunity Zones were created as a result of the 2017 Tax Cuts and Jobs Act, to encourage private investment in qualified opportunity zones.  The goal of these opportunity zones is to strengthen distressed neighborhoods across the United States through economic development and incentivize job creation in those communities. One of the requirements of earning a designation as an Opportunity Zone is that the area has a poverty rate of at least 20%.

The core of the program is to encourage investors to reinvest capital gains, which can come from any investment — including stocks, bonds, real estate and partnership interests — into these zones.

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Opportunity zones are certain designated tracts that provide significant tax benefits to investors who invest in these areas to potentially eliminate a portion of the gain and all future appreciation.

Investments that are located in Qualified Opportunity Zones means that our investors may qualify for the following tax benefits:

  • Deferral allowed through December 31, 2026

  • 5 year holding period = 10% gain elimination

  • 7 year holding period = 5% more gain elimination (15% total)

  • 10 year holding period = Appreciation (in excess of gain) eliminated

Investment Types in Opportunity Zones:

  • Commercial Real Estate Development and Renovation in Opportunity Zones

  • Opening New Businesses in Opportunity Zones

  • Expansion of Existing Businesses into Opportunity Zones

  • Large Expansion of Businesses already within Opportunity Zones

 

How the Program Works:

Investors are able to invest in Qualified Opportunity Zones through an investment called an Opportunity Fund. The opportunity zone program allows individuals and businesses to liquidate a wide variety of appreciated assets and to reinvest all or a portion of the gain into qualified opportunity funds within 180 days of triggering the gain.  The gain can then be deferred and or eliminated up until Dec 21, 2026.

The longer shareholders keep their interests in the funds, the more rewards they receive. After five years shareholders will pay no taxes on 10% of the gains. After seven years, 15% of the gains will not be taxed, and those holding investments for 10 years avoid paying taxes on all gains.

Tax Cuts and Jobs Act of 2017 created a new community development program that encourages private investment in qualified opportunity zones. This program allows taxpayers to defer unlimited amount of gain and reduce gain from the sale or exchange of property if the taxpayer reinvests the gain proceeds in a qualified opportunity fund.

Example:

A taxpayer owns stock with a basis of $20,000 and sells the stock in 2019 for $120,000.  The taxpayer would normally recognize $100,000 of the gain in 2018. Under the new program, the taxpayer may defer this gain and eliminate tax on future appreciation by investing the $100,000 gain in a qualified opportunity fund within 180 days of the sale. The investment, while in the Opportunity Zone, appreciated to $150,000, tax on that gain was $0 after 10 years.

The process of investing through a Qualified Opportunity Fund

Investor sells an appreciated asset with a realized capital gain. 

Within 180-days, they invest those capital gains into a Qualified Opportunity Fund to defer capital gains tax.

  • 5-year Hold

10% reduction of taxable capital gain.

  • 7-year Hold

15% reduction of taxable capital gains

  • 10-year Hold

All capital gains are tax exempt.