3 Common Questions About Opportunity Zone Investing

1 Jan 2020

3 Common Questions About Opportunity Zone Investing

Our company, the American Group (our Family Office), is involved with multiple opportunity zone funds, so I regularly interact with many investors who invest in these funds. When I'm speaking with an investor I will be asked at least one (and usually more) of the following questions:

1. Do I have to invest my initial investment? No!

2. Did I miss the boat? Only if you wait more than 180 days.

3. Can I invest gains from any capital asset, including liquidated stocks and bonds? Absolutely!

The answers to these questions are straightforward and tend to make our investors very, very happy. Here they are in a little more detail for your benefit as well:

1. You do not have to invest your base money in an opportunity fund, you invest only your capital gains from any capital asset, long or short term.

This means if you have $1 million in capital gains after liquidating some of the assets or stock holdings in your portfolio, you do not have to invest the monies you spent obtaining the asset (unlike a 1031 exchange in real estate). To defer and discount the taxes from that gain, you need only to invest the $1 million gain into a Qualified Opportunity Zone (QOZ) Fund.

2. Did I miss the boat?

There was a lot of buzz about investors needing to place their capital gains in opportunity funds before the end of 2019 in order to garner maximum tax advantages. Given that it is now 2020, a lot of investors think it is too late for them to invest. Not true! You can still garner massive tax advantages by investing in an opportunity zone fund this year.

Does this mean you can put off investing indefinitely? Absolutely not. You have missed the boat if you have waited more than 180 days after having realized your gain or receiving your K-1. After another two years you will lose a 10 percent reduction in taxes beyond the 5 percent lost by not investing in 2019, but these are small potatoes compared to the federal tax-free status you will earn by staying in the QOZ fund for 10 years. If you invest now, the tax benefits can be staggering.

3. Can I invest gains from any capital asset, including liquidated stocks and bonds?

Real Estate investors often ask this because they are used to 1031 exchanges, which require investors to reinvest capital gains plus their initial investment into the same type of asset they sold. When it comes to placing funds in opportunity zones, however, you can use capital gains from any type of capital asset.

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by Fred Hameetman

Fred Hameetman is the chairman of The American Group, which is now organizing a second QOF based on investor feedback and the unique features their investors requested. Learn more about this fund, the AAAmerican Opportunity Fund, and its focus on properties in Florida, Texas, and Arizona by visiting www.AmericanGroup.us.

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