Email Adam Email
Financial
Dec 14, 2018

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

Sponsored Content provided by Adam Shay - Director of VCFO Services, Red Bike Advisors

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

Redbikeadvisors block[55]
Ico insights

INSIGHTS

SPONSORS' CONTENT
Pfinder john zachary

Back to the Basics: Required Minimum Distributions

John B Zachary - Pathfinder Wealth Consulting
2022052 75 142344351

Bridging Futures: The Case for Toll Funding in Wilmington’s Cape Fear Memorial Bridge Revamp

Natalie English - Wilmington Chamber of Commerce
Unknown 7112393341

Why Feasibility is Paramount to Success

Holly Segur - Lead Intuitively – Corporate Coaching

Trending News

Haley Promoted To President, CEO Of Wilmington Downtown Inc.

Staff Reports - Jun 18, 2024

Commercial Real Estate Firm Adds Four Partners

Staff Reports - Jun 18, 2024

Women To Watch Awards Finalists Announced

Staff Reports - Jun 18, 2024

Blue Surf Cafe To Celebrate 10th Anniversary, Add Dinner Service

Jessica Maurer - Jun 19, 2024

Proposed Castle Hayne Projects Could Bring Thousands Of Homes, Commercial Space

Emma Dill - Jun 17, 2024

In The Current Issue

Aging In Place

Based on an age-in-place philosophy, CCRCs have existed for more than a century....


Beach Towns Rank On USA Today Top 10 List

Carolina Beach garnered the top spot of the local beaches at No. 2....


Pretzel Production Presence

Drink’N Pretzel makes seasoned sourdough pretzel pieces. Officials say the company began with the mission of creating a snack that pairs wit...

Book On Business

The 2024 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

2024 Power Breakfast: The Next Season