The Opportunity Zones Program was passed by Congress as part of The Tax Cuts and Jobs Act of 2017. It was created to provide tax incentives for those who participate in long-term private investment in designated underserved areas. Through investment in qualified opportunity zone funds, investors may help energize the economic development of low-income communities throughout the country while deferring and reducing their tax liability on certain gains.
The Opportunity Zones Program is designed to allow investors to defer and reduce capital gains in any asset class, not just real estate. By investing their realized capital gains into an opportunity zone fund, investors may defer their gains and receive a step-up in their basis over time. In addition, for opportunity zone fund investments held for at least 10 years, investors are not subject to federal income tax on any gains at disposition. It is estimated that among U.S. households, there is $3.8 trillion dollars in unrealized gains in stocks and mutual funds alone.* Now it is possible for an investor to liquidate those investments and invest any portion of their capital gains into a qualified opportunity zone fund to defer and ultimately reduce their capital gains taxes.
Unlike a 1031 Exchange, which requires exchanging the entire amount of real estate to defer tax, the Opportunity Zones Program offers the flexibility to reinvest only the amount of the capital gain (and not the full proceeds) in a qualified opportunity zone fund. And while a 1031 exchange is limited to real estate and requires reinvestment into more real estate, opportunity zones do not, allowing an investor to reinvest their capital gains into a wider range of equity investments in business, real estate funds and business assets located within a qualified opportunity zone.**
** A qualified opportunity zone fund must hold at least 90% of its assets in qualified opportunity zone property.
For more information on The Opportunity Zones, please call our Internal Sales Department
(w) 1-866-PAC-OAK7 (1-866-722-6257)
Pacific Oak Capital Markets Group
3200 Park Center Drive, Suite 600
Costa Mesa, CA 92626