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Opportunity Zone Fund Tax Benefits: Three Key Takeaways with Nick Gibbons, CPA

by Angela S. Hwang, on Mar 26, 2020 10:21:33 AM


In case you missed it, check out our recent webinar with tax expert Nick Gibbons, CPA, a director at Armanino LLP, one of the top 25 largest independent accounting and business consulting firms in the U.S. 

Speaking with Erik Hayden, Nick took a deep dive into the key tax benefits and regulations for investing in a Qualified Opportunity Zone Fund (“QOZF”) in light of final federal amendments issued in December 2019.  

Here are the three key takeaways: 

1. Opportunity Zone tax benefits — “a once-in-a-generation opportunity”

For starters, an investment in a QOZF must come from a capital gains event –  the sale of stock, sale of a business, or sale of real estate. 

“The incredible federal tax benefits (that come with investing in an Opportunity Zone Fund),” said Nick  “create a “once in a generation” opportunity for investors.”  

How? Investors receive a six-year deferral of capital gains taxes. After six years, they get a 10% reduction of those taxes. Then, after the investment “seasons” in the QOZF for 10 years, all profits from the investment are tax free.

2. Final regulations — two big benefits

The U.S. Treasury and IRS released final OZ regulations in December, giving investors much more clarity and confidence, according to Nick. 

Nick also pointed out how these revisions make OZ funds even more attractive by highlighting the following: 

Zero Depreciation Recapture
 
IRS requires taxpayers to pay back the benefits earned from asset depreciation over time; however, under the latest OZ Fund rules, there is no depreciation recapture


What does this mean for investors? When the OZ Fund projects they’ve invested in are sold in 10 years, they will not be required to pay any depreciation recapture.  

180-day timing flexibility

The latest regulations allow more time for investors to move their capital gain from a sale of business to invest in an Opportunity Zone Fund by giving them three options: 180 days from the date of their capital gains event, 180 days from the end of the year, or 180 days from March 15. 

This amendment gives investors 75 more days to make a move.

3. What tax forms investors need 

In addition to discussing these final OZ regulations, Nick also covered three tax forms investors need to know which are: 8948, 8997 and K-1

 

Have more questions for Nick or interested in learning more about investing? Contact us today.

 

THIS MATERIAL IS NEITHER AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY SECURITIES. THE OFFERING AND SALE OF INTERESTS IN URBAN CATALYST OPPORTUNITY FUND I LLC (“URBAN”) IS BEING MADE ONLY BY DELIVERY OF URBAN’S PRIVATE PLACEMENT MEMORANDUM (“PPM”), CERTAIN ORGANIZATIONAL DOCUMENTS, SUBSCRIPTION AGREEMENT AND CERTAIN OTHER INFORMATION TO BE MADE AVAILABLE TO INVESTORS (“OPERATIVE DOCUMENTS”) BY URBAN’S SPONSOR.   ONLY ACCREDITED INVESTORS CAN INVEST.  PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.  INVESTMENTS IN SECURITIES ARE SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK, AND ARE NOT SUITABLE FOR ALL INVESTORS.  PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX AND LEGAL PROFESSIONALS PRIOR TO MAKING INVESTMENT DECISIONS. 

Topics:Opportunity ZonesSan JoseSilicon ValleyOpportunity FundGeorgiaErieAlabamaColoradoPennsylvaniaAltanta

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