OPPORTUNITY ZONES: A NEW TECHNIQUE TO DEFER TAXES

Most investors are generally familiar with Internal Revenue Code section 1031 which allows for tax-free like-kind exchanges of investment or business assets.  The 2017 Tax Act has restricted its use solely to real estate.

However, what the Tax act takes away it also gives – the enactment of Section 1400Z

Section 1400Z provides for an investment in a Qualified Opportunity Zone Fund (OZF).  A OZF investment can:

1. Defer taxes on capital gains from any source;
2. Such deferral lasts until the earlier of the sale of the investment or 12/31/2026;
3. An equivalent forgiveness of 10% of the gain if the investment is held for 5 years;
4. An additional equivalent of 5% gain forgiveness if held for 7 years
5. If the investment is held for 10 or more years, no additional gain recognition on sale of investment.

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