Opportunity Zones are specific census tracts (roughly 20% of each state) nominated by the governor of each state that qualify for investment in business or property through Qualified Opportunity Funds. View a map of Opportunity Zones across the USA.
Qualified Opportunity Funds are unique investment vehicles that enable investors to take advantage of new tax incentives incorporated invest in businesses and property located in Opportunity Zones.
|Opportunity Fund Requirements|
|Must be certified by the U.S. Treasury Department.|
|Must be organized as a corporation or partnership for the purpose of investing in Qualified Opportunity Zone Property.|
|Must hold at least 90% of their assets in Qualified Opportunity Zone Property.|
|Qualified Opportunity Zone property includes newly issued stock, partnership interests, or
business property in a Qualified Opportunity Zone business.
Specific tax incentives are offered to tax payers that invest their capital gains into Qualified Opportunity Funds based on the length of time their investment is held. These tax incentives include:
Many investors have inquired about the primary differences between a 1031 exchange and an Opportunity Zone investment. We’ve added a table below comparing various aspects:
|Comparison of Tax Deferred Real Estate Investment Structures
|Comparison||1031 Exchange||Opportunity Zone|
|Use of Property||Must be like-kind||Does not need to be like-kind|
|Nature of Property||Must be real estate||Can be real estate, business property or operating business.|
|Identification of Reinvestment||45 days||180 days|
|Closing on Reinvestment||180 days||180 days|
|Proceeds to invest||Entire proceeds from sale||Only the gain on the sale|
|Partnership Interests||Not allowed||Allowed|
|Stock in Corporations||Not allowed||Allowed|
|Recognition of Deferred Gain||Upon sale of replacement property unless further deferred to new like-kind property||“Recognition Date”- earlier of sale of investment in QO Fund, or December 31, 2026|
|Tax Basis Step-Up||None||10% if 5-year hold. 15% if 7-year hold.|