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What is a Qualified Opportunity Zone Investment Fund?
The Tax Cuts and Jobs Act of 2017 created Qualified Opportunity Zones (QOZs) to provide potentially significant tax benefits to investors who re-invest capital gains into long-term investments in communities designated for economic development.
This solution is useful for accredited investors who have substantial capital gains, a desire to realize them in a tax-efficient manner, and a commitment to socially-impactful investments.
Including foreigners with US Tax returns
Family Offices, Trusts & Estates
Types of Gains Eligible for Opportunity Zone Benefits
Nearly any kind of capital gain can be rolled over into an Opportunity Zone Investment. Gross gains are eligible; no need to net losses. Capital gains need to be invested in a QOZ Fund within 180 days of the sale (or the taxable year end of the partnership in case of K-1's.
Stocks And Bonds
Short and long-term capital gains on stocks, bonds and options
Exercise of employee stock options or vesting of restricted stock
Gain from disposition of real estate, including personal residence
Gain on sale of a business
Gain allocated from a partnership on a K-1
Sale of other property (e.g. art, bitcoin)
Section 1231 gains
Gains from sale of tangible property used in a trade or business were initially required to be netted against Section 1231 losses
However, gross gains can now be used to invest in a QOF
Investors commit gross gains (no need to net out losses)
Investors may have eligible gains even with tax loss harvesting at the end of the year
Investors may ‘activate’ a loss for this year by committing any gains to OZ, and carry the loss forward indefinitely (and carry back five years if investing as a corporation)
Provides additional tool for tax planning –no ‘wash rule’ for gains
Year-end Tax Considerations
Three Basic Conditions of the Opportunity Zone Program
Well Aligned with GTIS Strategy and Experience
Invest in designated Qualified Opportunity Zone locations
8,700 Census tracts covering a variety of underserved areas
The QOZ Fund is a direct continuation of GTIS investment strategy and focus on areas undergoing transformation
OppZone experience–over $180m of equity commitments prior to QOZ program; First ‘original-use’ project realized in March 2021
Invest in ground-up development or substantial redevelopment
Cannot simply acquire existing cash-flowing properties
GTIS team and strategy focused on ground-up development since the firm’s inception in 2005
In-house development capabilities plus JVs with 30+ local development and construction partners
Hold investment for a minimum of 10 years to deliver long-term benefits to the community
Maintain QOZ certification status, complex reporting requirements
Tax abatement is fair compensation for the long-term hold – QOZ is not a strategy, just a tax structure
GTIS has an established fund management platform investing on behalf of the world’s largest pension plans and wealth managers with extensive reporting, institutional-style fees and governance