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
Rob20beale2 311791810

The Key to Project Success

Rob Beale - W.M. Jordan Company
Webilm julieformal kellystarbuckcom mg 5471

Business is Growing at the ILM Business Park

Julie Wilsey - Wilmington International Airport
Headshot2

The Importance of Establishing a Support System for your Educational Journey

Dani Somers - North Carolina Wesleyan

In The Current Issue

Officials Forecast Hot Summer Travel Season

Marketing efforts by the Wilmington and Beaches Convention & Visitors Bureau (CVB), coupled with mended tourist attractions, are behind the...


Columbus Ship Replica Comes To Wilmington

Modeled after the Santa Maria, the Nao Santa Maria has been on display at Port City Marina...


Info Junkie: Jim R. Roberts

Info Junkie Jim R. Roberts, Founder of Network for Entrepreneurs in Wilmington (NEW) and Wilmington Angels for Local Entrepreneurs (WALE), o...

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

2019 WilmingtonBiz Expo Keynote Lunch - CEO, nCino, Pierre Naude`
Transporting the Future - Power Breakfast 3.12.2019
Health Care Heroes 2018