Qualified Opportunity Zone Investment (QOZ):
The 2017 Tax Cuts and Jobs Act established the Qualified Opportunity Zone program to provide a tax incentive for private, long-term investment in certain communities nominated by the state and certified by Treasury Department. Investors in these programs are given an opportunity to defer and potentially reduce tax on recognized capital gains.
Since QOZ legislation was enacted in 2018, capital has poured into this space. A report released by the Council of Economic Advisors in December 2020 estimated that $75 billion in private capital had been deployed into QOZs by the end of 2019, and the U.S. Treasury estimates over $100 billion in annual new investment could move to opportunity zones over the next decade.
What is an Opportunity Zone?
An Opportunity Zone is a community nominated by the state and certified by the Treasury Department as qualifying for this program. The Treasury Department has certified approximately 8,700 Opportunity Zones nationwide. A list can be found at the U.S. Department of the Treasury, Community Development Financial Institutions Fund.
How does this program work?
To defer a capital gain (including “net” §1231 gains), a taxpayer has 180 days from the date of the sale or exchange of appreciated property to invest the realized capital gain dollars into a Qualified Opportunity Zone Fund. The fund then invests in Qualified Opportunity Zone Property.
The taxpayer may invest the return of principal as well as the recognized capital gain, but only the portion of the investment attributable to the capital gain will be eligible for the exemption from tax on further appreciation of the Opportunity Zone Investment, as explained below. The Opportunity Zone program allows for the sale of any appreciated assets, such as stock, real estate, private business, precious metals, cryptocurrencies and art with a reinvestment of the gain into an Opportunity Zone Fund. There is no requirement to invest in a like-kind property to defer the gain.
There are three primary tax benefits for QOZ Investors:
Qualified Opportunity Zone Fund
A Qualified Opportunity Zone Fund is any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property.
Similar to other investments, an investment in an Opportunity Zone Fund may increase or decrease in value over the holding period. In addition, income may be paid on this investment. Given that the purpose of the program is to improve particular areas, it is expected that the fund will continue to invest in the improvement of the property in which it is invested. Cash flow may occur once the property improvements are complete and the property is leased or sold to third parties.
Since Qualified Opportunity Zone Funds are new income tax planning tools and are new investment options for taxpayers, these investments may involve risk. Like many other types of investments, the risks may potentially include market loss, liquidity risk, and business risk to name just a few.
Qualified Opportunity Zones vs. 1031 Exchange
The tax deferral function of a QOZ investment is similar to that achieved by a 1031 Exchange. However, deferrals in a 1031 Exchange are only available on the sale of certain assets, and the total proceeds from such a sale must be reinvested in like-kind property. Unlike a 1031 Exchange, only the gain from the prior investment needs to be rolled into the QOZ investment.
Avant Plus Capital QOZ Fund:
Tax Advantaged real estate development.
Current QOZ project:
Commercial development in 6.5 Acre land in Sherman, TX
The Fund’s portfolio consists of ground-up development projects that are able to produce viable returns before factoring in the QOZ tax benefits.
After the properties are built, the Fund will be a diversified portfolio of real estate properties that produces stable cash flow for investors.
Boost your after-tax return by more than 75%
An investment in our QOZ Fund can boost your after-tax real estate returns by more than 75%, as compared to a non-QOZ investment in similar properties.