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Opportunity Zone

Qualified “Opportunity Zones” were created by Congress in the 2017 Tax Cuts and Jobs Act to stimulate investment in low-income communities throughout the United States.

Investments in Opportunity Zones must be made through a partnership or corporation, commonly known as a qualified “Opportunity Fund”. The federal tax incentives associated with investments using this qualified Opportunity Fund include capital gain deferral and partial gain exclusion on realized gains reinvested in properties within the zones and full gain exclusion on appreciation of the Opportunity Fund itself (provided the investment is held for 10 years).

There are three main tax benefits available when investing in Opportunity Zones. The first two relate to the treatment of capital gains resulting from a taxpayer’s existing investment. The third relates to the treatment of gains after making a new Opportunity Zone investment. Basically, these incentives largely evolve around the investment of an individual or company's capital gains in an Opportunity Zone Fund, which in turn invests in businesses or properties in a zone. At the first level, investors can immediately defer paying taxes on their gains; at the second level, they can earn a 15% tax cut on their gains if they hold on to their shares in the investment for seven years. At the higher level, if they hold onto their shares for 10 years, they don’t have to pay income taxes on money they earn when their shares in the development increase in value.

Tax Benefits on Existing Investment

1. Capital Gains Deferral: Realized capital gains that are reinvested in an Opportunity Fund within 180 days can be deferred from taxable income until the earlier of December 31, 2026 or the date the Opportunity Fund is disposed of. The existing investment can include publicly traded stock, business assets, personal assets or any other property qualifying for capital gain tax treatment.

2. Step-up in Cost Basis: An investor can exclude up to 10% of the original realized gain if the Opportunity Fund is held for five years and up to 15% of the original gain if the Opportunity Fund is held for seven years. In other words, just 85% of the original gain will be included in taxable income if the Opportunity Fund is held for seven years. Tax Benefits on Opportunity Zone Investment

3. Tax Forgiveness on Capital Appreciation: If an Opportunity Fund is held for ten years or more, the investor may elect to treat the cost basis as equal to the fair market value. The election permits an investor to exclude any gain on the sale of the Opportunity Fund from taxes. It is important to note that all three of these tax benefits are only available to those investors who reinvest capital gains into an Opportunity Fund. Other sources of funding are not eligible for these tax

To learn more about Opportunity Funds and the relevant legislation, please see the links below.

Mike Walden: Can opportunity zones boost local economies?


The Fundamentals of Opportunity Zones: Investing in Opportunity Act “IIOA” 2017 Tax Cuts and Jobs Act


What you need to know about Opportunity Zones 

What is an “investment ready” real estate project, and how do you get there?


Balancing Investor Perspectives with Community Needs 


The 38th Annual Economic Outlook Conference


The 38th Annual Economic Outlook Conference Program

Current Opportunity Funds can be found here: 

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