Qualified Opportunity Zone Fund

[Darryl S.]

Looking for some information on Qualified Opportunity Zone Funds. Has anyone used one to "store" some excess capital gains to defer Taxes?  Some background I am retired and sold down some of my highly appreciated rental business assets in early 2024 and I will have around 1/2 Mill Capital gains for 2024 taxes. I am NOT interested in owning any more real estate (retired here man) so I had planned on just paying my 15% long term Capital Gains tax rate and moving on to my "safe money" retirement program of MYGA's / CD's and High yield Savings account / Bonds / some Stocks. However there is this really REALLY Nasty IRS Rule called AMT that has me looking for a way to spread this gain over a few years. Is a Qualified Opportunity Zone Fund just an investment fund like buying mutual funds etc?  If so maybe I can buy into it and pull the money out annually to stretch the capital gains over a few years? If anyone has done this successfully please let me know. Not a lot of info on the internet about these that I can find at this time... Tks D

[Steven Candito]

Look into Belpointe OZ.  I don't know if it will help with your exact issue, but they are an easy-to-use Opportunity Zone fund.  The link to their home page is below:

https://belpointeoz.com/home/

[Darryl S.]

Thank You very much. I will certainly check that out.  

[Kory Reynolds]

You can most definitely do this.

Take $x of your money, and invest it into a Qualified Opportunity Fund - lots of them out there looking for cash.  On that $x, you can defer $x of your gain, which would then be deferred from 2024, and taken into income on 12/31/2026.

Working with your tax advisor you could toy around with what is the right amount to defer from 2024 until 2026, and just invest that amount.  

Consider the cash flow timing - you'll recognize that gain in 2026, and unless the QOF does a cash out refi in the next few years, you'll likely need to source the cash to pay that gain from another source.  Or consider timing of other deductions into 2026 (if available) to offset that gain.

Note that you cannot defer the ordinary income recapture, if any, that you have on the sale of your rentals into the QOF - only capital/1231 gains.

[Darryl S.]

Good info, it sounds like I will need to be careful to segregate the Depreciation recapture which would probably be classified as "ordinary income"  I have an inquiry out to the Belpointe PREP OZ fund to get all the details.  Would be super simple if it is set up like a stock where you can buy in and sell off as needed to effectively spread the gain over a period of tax years. Since I am retired and have been able to par my normal taxable annual income down to a bare minimum it might be possible to use a small portion of the capital gains in future tax years at Zero tax rate or at least at a very desirable low rate. The key seems to be not letting this current tax rate issue push me into making a rash Risky investment that could end up costing more than simply paying the excessive taxes now!  

[John Smith]

@Darryl S.  I am in similar tax situation as yours.  It will be great to know what you end up doing in your situation.  Thanks!

[Samantha P.]

Did you get any information about this? I'm thinking about doing the same thing.