Follow Adam Linkedin Twitter Facebook
Email Adam Email
Financial
Dec 14, 2018

Qualifying Opportunity Funds: The New Holy Grail of Tax Deferral?

Sponsored Content provided by Adam Shay - Managing Partner, Adam Shay CPA, PLLC

A frequent question that we get upon a large capital gain event (think business exit) is “What can I do to minimize my taxes from this sale?” 

The answer used to be, “Not much.” There might be a little bit you could do here or there or, if you were lucky, the transaction might qualify for a like-kind-exchange.

Tax reform has since done away with like-kind-exchanges for anything but real estate.  However, tax reform did add an attractive new option – Qualifying Opportunity Funds (QOF).  Individuals and entities qualify to use QOF.

Qualifying Opportunity Funds are a partnership or corporation organized for the purpose of investing in a Qualified Opportunity Zone. Qualified Opportunity Zones are determined by census track; they are generally going to be economically depressed areas. Qualifying Opportunity Funds allow a taxpayer to defer capital gains until Dec.31, 2026 (earlier if investment in opportunity fund is sold earlier).

Unlike like-kind-exchanges, you don’t have to reinvest the entire sales price, but only the capital gain portion of the sale. If the Qualifying Opportunity Fund investment is held for at least five years, 10 percent of the gain is permanently untaxed. If held at least seven years, the total comes to 15 percent of the gain for permanent exclusion.

Here are some rules to consider with the Qualifying Opportunity Fund tax deferral:

  • The reinvestment of capital gains must be done within 180 days of the sale that triggered capital gains. With capital gains triggered within a pass-through business entity, you can also elect to invest within 180 days within the end of the tax year of the entity.
  • The Qualifying Opportunity Fund must invest 90 percent of its assets in a qualified opportunity zone property.
  • You need to make sure the entity you are investing in qualifies as a Qualified Opportunity Fund before investing.
  • The property invested in must have not been used in the Qualified Opportunity Zone before.
Qualified Opportunity Funds are very simple, but the details can be mindboggling; don’t try to do this on your own. The devil is in the details in order to make sure you qualify for tax deferral. Seek professional help to make sure you receive the tax referral that you are hoping to receive.

My goal today was to make you aware of Qualified Opportunity Fund tax deferral and some of the details as to how they function.

Adam Shay, CPA (NC License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. Over the last several years, the firm has grown from a one-man shop to one of the largest firms in the Wilmington area. Adam focuses on minimizing taxes and improving the financial results of entrepreneurs. Those results are obtained by taking a proactive approach to all aspects of taxes and financials. Adam is actively involved in supporting the Wilmington entrepreneurial and startup community. He earned a Bachelor of Business Science in commerce from the University of Virginia and a Master of Business Administration (MBA) degree from the University of Maryland. During his spare time, Adam enjoys spending time with his two boys and wife, Sarah, as well as coaching and watching sports and spending time outdoors.

Other Posts from Adam Shay

Adam shay blk 52015121549
Ico insights

INSIGHTS

SPONSORS' CONTENT
Dave sweyer 300 x 300

Learning The Language Of Property Management

Dave Sweyer - Sweyer Property Management
Dallas headshot 300x300

Must You Fire Your Managers To Grow The Business?

Dallas Romanowski - Cornerstone Business Advisors
Robindavisccu1 1011944433

Is A HELOC Right For You?

Robin Davis - Corning Credit Union (CCU)

Trending News

Bankruptcy Filing: Vertex Railcar Owes More Than $45M

Cece Nunn - Nov 19, 2019

Beach & Barn Raises $230K

Johanna Cano - Nov 19, 2019

Group Forms To Oppose Hospital Sale Or Partnership

Johanna Cano - Nov 20, 2019

Wave Transit To Unveil New Downtown Trolley Next Week

Christina Haley O'Neal - Nov 19, 2019

Area Restaurants Honored At Taste Of Wrightsville Beach 

Jessica Maurer - Nov 20, 2019

In The Current Issue

Habitat Chief Leads The Way Home

Steve Spain has spent much of his professional life combating homelessness. Heading into his seventh year as executive director of Cape Fear...


Take It Away, Thanksgiving Day

Not everyone looks forward to spending half the holiday in the kitchen on Thanksgiving Day. Fortunately, there are plenty of local options....


Info Junkie: Adam Hooks

Adam Hooks, CEO of EMS LINQ, shares his top info and tech picks....

Book On Business

The 2019 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

August 26, 2019 Power Breakfast: A Healthy Sale?
WILMA's Leadership Accelerator
2019 WilmingtonBiz Expo Keynote Lunch - CEO, nCino, Pierre Naude`