Updated: Mar 11
The IRS recently extended some deadlines that could potentially help you but only through 3/31/2021.
The Opportunity Zone Program, enacted as part of the Tax Cuts and Jobs Act of late 2017, has great potential to create jobs and spur economic growth while creating a potentially powerful tax strategy for investors. The Opportunity Zone Program is designed to attract long-term investments in designated urban and rural areas throughout the United States.
Investors have the opportunity to defer, reduce and ultimately eliminate capital gains if all the IRS criteria is met. You have 180 days to reinvest your gains into a Qualified Opportunity Zone Fund (QOF). Recently the IRS granted extensions to investors due to the COVID pandemic and certain investors can still defer gains as far back as 2019 (see chart below). A capital gain can be from a sale of real estate, a business, stock/bonds/mutual funds, cryptocurrencies, etc. QOFs allow investors to unlock unproductive assets and deploy this fresh pool of capital back into designated Qualified Opportunity Zones via a QOF, potentially creating jobs and spurring economic growth. You must be an Accredited Investor for these types of investments (SEC Accredited Investor Definition).
Education is power and we really want people to know what options are available to them. This strategy and the other tax deferral strategy we use before real estate is sold (1031 exchanges/DSTs) might not work for everyone but knowing that they are available is helpful. The IRS has given us two viable options to help defer some to all taxes depending on the strategy. Please feel free to reach out to learn more on both strategies and potentially use one or both now or in the future.
Sean D. Whalen, CFP ®, MSF
This is for informational purposes only, does not constitute as individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance.
There are material risks associated with investing in real estate securities including liquidity, tenant vacancies, general market conditions and competition, lack of operating history, interest rate risks, the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and potential loss of the entire investment principal.
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Securities offered through Concorde Investment Services, LLC, member FINRA/SIPC Insurance offered through Asset Strategy Financial Insurance Agency, Inc. (ASFG) Advisory services provided by Asset Strategy Advisors, LLC (ASA), a Registered Investment Advisor. CIS is independent of ASFG and ASA.