2. OPPORTUNITY FUND-
A qualified Opportunity Fund is an investment vehicle that is set up as either a
partnership or corporation for investing in eligible property that is located in an
Opportunity Zone and that utilizes the investor’s gains from a prior investment for
funding the Opportunity Fund.
OPPORTUNITY ZONE-
An Opportunity Zone is an economically-distressed community where new
investments, under certain conditions, may be eligible for preferential tax treatment.
Localities qualify as Opportunity Zones if they have been nominated for that
designation by the state and that nomination has been certified by the Secretary of the
U.S. Treasury via his delegation authority to the Internal Revenue Service.
3. Investor
Incentives
OPPORTUNITY ZONE INVESTMENTS
provide an immediate benefit to investors of
deferring payment of the capital gains tax that
would be paid in 2018 until 2026. Further
incentives are linked to the duration of an
investor's commitment to Opportunity Fund
investments.
THE OZ TAX INCENTIVE WILL ALLOW
a modest reduction in capital gains taxes in
exchange for holding Opportunity Fund
investments for 5-7 years.
IF INVESTMENTS ARE HELD 10+ YEARS
gains accrued on the Opportunity Fund
investment during that 10 year period will not be
taxed, further incentivizing patient capital.
U.S. investors currently hold
$6.1 trillion in unrealized
capital gains, representing a
significant untapped resource
for economic development.
Opportunity Funds will
allow these investors
throughout the country to
pool and deploy their
resources in Opportunity
Zone investments.
If the investment is sold earlier, it can be rolled into another Opportunity Fund and remain tax-free
4. Investment
Example 1) $238,000 of capital gains deferred
by investing $1 million in an
Opportunity Fund in 2018
2) $35,700 tax savings in 2026, reflecting
15% cancellation of initial capital gain
3) 100% of the gain earned on the
Opportunity Fund is tax-free
In 2018, an individual investor sells 1,000
shares of stock that was purchased in
2013 for $250,000. The sale at $1,250 per
share results in a $1 million capital gain.
Instead of paying the capital gains tax on
this sale, the investor rolls the $1 million
gain into a Qualified Opportunity Fund.
The assumed value of this investment in
2028 is $1.5 million. 100% of the gain
earned on the Opportunity Fund is tax-
free. The benefits received by this
investor are as follows:
5.
6. Examples
Commercial real estate development and
renovation in Opportunity Zones
Large expansions of businesses already in
Opportunity Zones
Opening new businesses in Opportunity
Zones
Expansion of existing businesses into
Opportunity Zones
7. Section 1031 versus Opportunity Zone
SECTION 1031 OPPORTUNITY ZONE
Eligible asset classes Only “like kind” real assets held
for productive use
Any
What needs to be invested? All proceeds Only capital gains
Investment timing Within 180 days Within 180 days
Intermediary required? Yes No
Tax benefits • Can delay tax indefinitely, but capital gains
are fully taxable at the time of sale of the
new property.
• Heirs get step up in basis to the market
value, but can eliminate tax up to the estate
tax exemption.
• OZ reinvestments receive a 10% increase in
basis after 5 years, and 15% after 7 years.
• Capital gains tax are deferred until Dec. 31,
2026.
• Zero capital gains tax after 10 years.
Flexibility None Multiple options
8. www.hunterrenaissance.com
Development LLC (HRD) is a venture
between Hunter Investments, LLC and The
Renaissance Companies, whose combined
experiences range from urban infill to small
town Main Street resurgence to industrial
rail projects. With combined portfolios
representing more than twenty-five (25)
years of residential/industrial/commercial
development across the Midwest and in the
Pacific Northwest, the members bring a
depth and variety of knowledge and
expertise to HRD Design that is exciting and
new.
Hunter Renaissance Development LLC will be developing in Opportunity Zones in the Pacific Northwest in
2018-2019 and beyond
10. 2 & 3 BR units; attached garage option; stainless steel appliances; quartz counters; espresso cabinets; private balcony & patio;
in-unit washer & dryer; vinyl plank and carpet; large master suite w/walk-in closet; abundant storage space; no HOA fees
11. Summary
Opportunity
Fund:
An investment
vehicle organized
as a corporation
or partnership for
the purpose of
investing in
Opportunity
Zone property.
Per IRS guidance from
April 2018, Opportunity
Funds will be self-certified
(no approval or action by
the IRS is required.)
To self-certify, a taxpayer
will complete a form (to
be released in summer
2018) and attach that form
to his/her federal income
tax return for the taxable
year.
Additional compliance
and reporting
requirements are TBD.
Opportunity
Funds are
required to
invest 90
percent or
more of their
resources in
OZs.
Opportunity
Zone potential
includes stock,
partnership
interest, or
business
property in an
Opportunity
Zone business.
12. Bertoni, S. (2018, July 18) An Unlikely Group Of Billionaires And Politicians Has Created The Most Unbelievable Tax Break
Ever. Retrieved from: https://forbes.com/sites/forbesdigitalcovers/2018/07/17/
“There are almost no limits. No limits on how
much you can put in, how much tax you can
avoid and, for most of the country, the types of
taxes you can avoid, whether federal, state or
local. No limits on how long those proceeds
compound tax-free. And precious few limits on
what types of investments you can make.”
“This real estate opportunity brings new office
buildings, industrial districts, restaurants and
affordable housing—all of which can lay the
groundwork for an economic boom.”
“About 8,700 areas, ranging from rusty
industrial towns to dusty rural hamlets, have
been approved.”
(excerpt)
Opportunity Zones have
been supported by both
Democrats and Republicans
designed to spur economic
development and job
creation in distressed
communities.
About the bill
“…toward the tail end of the Obama
administration, Scott and Booker
introduced the bill on the Senate
floor while Congressmen Pat Tiberi
(R-Ohio) and Ron Kind (D-Wis.)
proposed it in the House… by now
they had a bipartisan group of
roughly 100 lawmakers sponsoring
the bill. Speaker Paul Ryan and
Senate Finance Chairman Orrin
Hatch backed it.”
(excerpt)
13. Plant your capital gains in
Opportunity Zone Funds
and watch them grow tax-free!
To learn more, contact
Nancy J. Kapp
773.278.8448 X211
773.968.8448
info@hunterrenaissance.com
www.hunterrenaissance.com