Watch the second episode in this exclusive series featuring Steven Bokiess, CPA, Partner for ways to reap tax advantages by investing in Qualified Opportunity Zones under the new Tax Cuts & Jobs Act.
Read the Transcript
For wealthy, high net-worth individuals that are anticipating a significant amount of capital gains, there’s a new provision in the tax law which creates Qualified Opportunity Zones that may be beneficial for deferring—and even potentially eliminating—a large amount of those gains.
The Qualified Opportunity Zone Fund effectively is a low-income community that is designated by the governor of a state. That designation is good for 10 years.
The way to take advantage of the incentives for investing in Opportunity Zone communities is to invest in a Qualified Opportunity Zone Fund. That’s a corporation or a partnership that invests 90% of its assets in low-income communities.
There are two primary advantages: The first is the deferral of capital gain income. Effectively, if non-zone property is sold and those capital gains are invested in a Qualified Opportunity Zone Fund, those capital gains are deferred for a certain period of time. Some of them are even fully eliminated. Once an investment is made in a Qualified Opportunity Zone Fund, if that investment is held for 10 years, any appreciation on that investment escapes taxation completely.
The one caveat to keep in mind is in order to get the initial deferral, within 180 days of realizing a capital gain, the proceeds (gain) need to be reinvested into the Qualified Opportunity Zone Fund.
Anybody with the expertise to invest in low-income communities can set up a Qualified Opportunity Zone Fund to invest in these Qualified Opportunity Zones.
Contact your Friedman tax advisor to discuss ways you can reap tax benefits from investing in Qualified Opportunity Zones.
Watch More Videos from this Exclusive Nine-part Series:
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- Transition Toll Tax with Edward Ajodah, CPA, JD, Principal
- Tax Reform's Impact on the States with Tom Corrie, JD, LLM, Principal
- Planning Opportunity Leveraging Trusts with Jonathan Curry-Edwards, CPA, Senior Tax Manager
- Global Intangible Low Tax Income (GILTI) with Ryan Dudley, CPA, CA, CTA, MIT, Partner
- Foreign Derived Intangible Incomes (FDII) with Erasmo Bruno, LL.M., JD, CPA, Partner
- Using 529 Plans to Pay for Education Costs with Jonathan Curry-Edwards, CPA, Senior Tax Manager
- Partner Audit Rules with Michael J. Greenwald, MPPM, CPA, Partner