Securities Law Considerations for Sponsors of Qualified Opportunity Zone Funds

April 02, 2019

Author(s): Daniel McAvoy

Reproduced with permission from Tax Management Real Estate Journal, Vol. 35 No. 4, 04/03/2019. Copyright © 2019 by The Bureau of National Affairs, Inc. (800-372-1033)

The 2017 tax act, enacted in December 2017, included various incentives for taxpayers to make investments that might spur economic development and job growth. One of the key incentives involves qualified opportunity funds that make investments in qualified opportunity zones. If a taxpayer chooses to sell assets generating a capital gain and invests the amount of the gain in an opportunity fund that complies with relevant tax rules, the taxpayer can defer and often reduce taxes on that gain, and the subsequent sale of the opportunity fund investment generally will not be taxable, provided that the investment is held for at least 10 years. Opportunity zones were finalized by the Treasury Department and the Internal Revenue Service in 2018, and along with a few designated adjacent tracts, they represent 25% of the low-income census tracts (with a minimum of 100) in each jurisdiction.

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