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
Burrus rob headshot 300x300

All Patches are Equal; Some Patches are More Equal than Others

Robert Burrus - Cameron School of Business - UNC-Wilmington
Sherrip2019 insights profile

That’s Who We Are

Sherri Pridgen - Cape Fear REALTORS®
Christy2

Roof Maxx is a Roofing Disrupter

Christy West - Roof Rescue of Wilmington LLC/Roof Maxx

Trending News

Sen. Peterson Files Complaint About Hospital Process Ahead Of Vote

Vicky Janowski - Sep 16, 2019

Rise Southern Biscuits Closes Wilmington Location

Jessica Maurer - Sep 17, 2019

Credit Union Buys Nearly 9 Acres On South 17th St. In $4.4M Deal

Cece Nunn - Sep 17, 2019

County Commissioners Vote To Explore Hospital Sale

Vicky Janowski - Sep 16, 2019

As Interest Grows In Redevelopment Project, County Sets RFQ Meeting

Johanna Cano - Sep 17, 2019

In The Current Issue

First Citizens Moving Closer To Entegra Merger

With the approval of its shareholders at last month’s annual meeting, Entegra Financial Corp. is moving ahead on a merger agreement with Fir...


Officials Study Blue Clay Site's Potential

The county-owned property at 4301 Blue Clay Road has been the center of a contract between to explore future possibilities for the site....


Boating Trends: Bigger Boats, Fewer Spaces

One of the latest trends in local boating is more boaters are choosing bigger boats, but they continue to have a hard time finding a place t...

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`