Qualified Opportunity Zones (QOZ)

A QOZB is a business in which at least 70% of tangible assets qualify as QOZ business property owned or located in a QOZ. At least 50% of the gross income earned by the business must be from the active conduct of the business in the QOZ and generally may not be a “Sin Business.”

Investments in QOFs are intended to help drive real estate development, job creation and overall economic growth in lower income communities.

Our team of financial advisors and tax professionals has experience in advising clients on QOZ and QOF investments, and we are committed to providing our clients with the resources and insights you will need to make informed investment decisions.

Deferral of Capital Gains Taxes: You can potentially defer paying tax on eligible capital gains from the sale of any assets, including those that cannot be 1031 exchanged by reinvesting the capital gains in a QOF within 180 days of the sale. The tax on the original capital gains would be deferred until the investment is sold or until December 31, 2026. 

What Is An “Eligible” Gain? A capital gain is eligible for deferral if it is from the sale or exchange of property with an unrelated party (not more than 20 percent common ownership) and the gain is treated as a capital gain (short-term or long term) for federal income tax purposes, including gains from:

• Stocks, bonds, options, hedge funds
• Primary and secondary residences
• Businesses, machinery, commercial buildings
• Land, livestock, art, wine, automobiles 

What Is An “Eligible” Taxpayer? QOZ regulations provide that taxpayers eligible to elect gain deferral include:

• Individuals
• C Corporations (including regulated investment companies and real estate investment trusts)
• Partnerships, and certain other pass-through entities

Installment Sales. Typically, only one part of installment sales can be 1031 Exchange. QOFs do not follow the same guidelines as 1031 exchanges and can help defer capital gains each year the installment payments take place.

Failed or Blown 1031 Exchanges. If an investor could not complete their 1031 Exchange for any reason or decided to completely bypass it altogether the QOF can still be utilized to defer those capital gains.

Important Deadlines. The QOZ Program final regulations were released on December 19, 2019 by the U.S. Treasury Department addressing much of the uncertainty from the QOZ Program’s original legislation under the 2017 Tax Cuts and Jobs Act.

K-1 Partnership Gains. The final regulations provide additional flexibility for K-1 partnership gains resulting in additional planning options for financial advisors. For example, assuming a calendar-year partnership, K-1 partnership gains realized on or after January 1, 2022, have until September 10, 2023 to complete an investment in a QOF that is eligible for QOZ Program tax benefits due to the three options allowed for calculating their 180 day window:

• 180 days starting with the date the asset is sold.
• 180 days beginning on the last day of the partnership’s taxable year (December 31st for a calendar year partnership).
• 180 days starting on the date the partnership’s tax return is due, without any extension (March 15th for a calendar year partnership).

Disclosure: Diversification does not assure or guarantee better performance/profit and cannot eliminate the risk of investment losses in declining markets. 

This website is neither an offer to sell nor a solicitation of an offer to buy any security which can be made only by a prospectus, or offering memorandum, which has been filed or registered with appropriate state and federal regulatory agencies and sold only by broker dealers and registered investment advisors authorized to do so.

This article is neither an offer to sell nor a solicitation of an offer to buy any security which can be made only by a prospectus, or offering memorandum, which has been filed or registered with appropriate state and federal regulatory agencies, and sold only by broker dealers and registered investment advisors authorized to do so.

Additionally, we cannot offer any of our open offerings unless we have a pre-existing relationship with a customer. Once we have obtained sufficient information to perform an evaluation of our new customers’ financial circumstances and sophistication in determining his or her status as an accredited investor, we would be able to discuss future offerings once they become available. Per our BDPs- 1031 Exchanges must not be made based on a general advertisement, seminars, group mailings or widespread public solicitation.