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What are Opportunity Zones?

Opportunity Zones are low-income census tracts nominated by state governors and certified by the U.S. Department of the Treasury.

These designated zones allow investors to put capital to work financing new projects and enterprises in exchange for certain federal capital gains tax advantages.

Brick Construction
Leaf Pattern Design

Qualified Opportunity Zone Funds (QOZ Funds)

QOZ Funds are private sector investment vehicles that invest at least 90 percent of their capital in Opportunity Zones.

These Funds provide investors the chance to put that money to work rebuilding the nation’s underdeveloped communities.

The fund model enable investors to pool their resources, increasing the scale of investments.

Tax Incentives That Encourage Investment

BENEFIT #1

Temporary Tax Deferral

Capital gains reinvested in an Opportunity Zone Fund will be deferred and recognized on the earlier of the date on which the opportunity zone investment is sold or December 31, 2026.

BENEFIT #2

Permanent Gains Exclusion

Capital gains from the sale or exchange of an investment in a qualified opportunity zone fund, will be excluded from taxation if the investment is held for at least 10 years.

Housing Development

QOZ FUND TIMELINE

YEAR 1
REINVEST GAINS
Reinvest capital gains proceeds within 180-days and begin deferring tax.
2027
PAY TAXES OWED

The tax holiday ends on December 31, 2026 and taxes on the original capital gain must be paid when filed in 2027.

 

2033-2047
Tax Free Gains

Pay no federal captial gains taxes on the gain from the sale of QOZ Fund investments which are held for more than 10 years.

WIDE VARIETY of DEVELOPMENT OPTIONS

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MULTIFAMILY

STORAGE

STUDENT HOUSING

OIL & GAS

Sector Focus

Qualified Opportunity Zone Funds are multifacited offerings.  Some focus on specific propery types while others provide a more diversified exposure.  Popular sectors include multifamily, storage, student housing, life sciences and Oil and Gas.  In addition, some offerings are singular properties that are to be developed while others may be 10 or more assets in a single portfolio in what is referred to as a blind pool.  The types of properties they seek to develop are identified, but actual properties have yet to be acquired.

Financing Events

In addition to differentiation by investment type, programs also differ by target liquidity events.  Some have expectation of financing that will be implemented to return a portion of investor capital in the first 5 years once the properties have been stabalized by income producing tenants.

Cost Segregation

Programs often use cost segregation and accelerated expenses to offset income which is anticipated to begin once properties are completed and stabilized.  One of the benefits of QOZ Funds is that there is no recapture of depreciation at the end of 10 years.

The Power of Tax Free Compound Growth

QOZ Fund Hypothetical Illustration

Two investors each sell an asset that generates a $1,000,000 long-term gain.

 

Investor A

Pays capital gains taxes and invests the remaining capital in a product that generates a 10% compounded annual return over ten years and then liquidates the investment.

 

Investor B

Invests the gain in a Qualified Opportunity Fund, which generates the same return over the same time period.

 

Both investors are residents of a state that conforms with the QOZ Program and are subject to the top marginal U.S. federal income tax rate of 20% on long-term capital gains for individuals, the net investment income tax of 3.8% and a state tax of 6.2%, for a total tax liability of 30%.

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1 This illustration assumes the investor is subject to the top marginal U.S. federal income tax rate of 20% on long-term capital gains for individuals, the net investment income tax of 3.8% and a state tax of 6.2% for a total tax liability of 30%. No brokerage or investment advisory fees are accounted for with respect to the none are accounted for with respect to the QOF example.

2 This assumes that the QOF investor is a resident of a state that conforms with the QOZ Program.

3 Assumes that the investor has no capital losses to reduce such capital gain and refers to the inclusion of the original, invested capital gains in such investor’s taxable income on December 31, 2026.

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All securities offered through Patrick Capital Markets, LLC Member FINRA / SIPC.  Investors should review any transaction and the various tax deferred and tax exclusion strategies and structures available with their tax and legal advisors.  Alternative Wealth Management does not provide tax or legal advice to individual investors.

The information provided in this website is for educational purposes only and does not represent an offer to purchase, acquire or engage in any transactions.  Securities discussed above would only be purchased through Private Placement Memorandum.  Securities and strategies discussed herein may be speculative and entail a high degree of risk.  Investments in Private Placements are suitable only for investors who have adequate means of providing for current needs and personal contingencies, can bear the economic risk of the investment, and have no need for liquidity.

The following is a brief overview of some of the risks that Alternative Wealth Management deems appropriate to highlight.  It is not and is not intended to be, a summary of all the risks associated with the strategies and securities discussed herein.

Delaware Statutory Trusts (DSTs) - DSTs are regulation D private placements that offer fractional ownership of real estate.  Investors should understand the risk factors of participating in such investments as outlined in this section in addition to the private placement memorandum; in particular real estate risks, liquidity risk, change of tax status among others.

Real Estate Risks – Real estate risks include those of specific property issues, the economy of the geographic locations, environmental hazards, the risk of loss of tenant and other factors typically associated with a real estate investment.

 

​Change of Tax Status - IRS tax rule changes may alter or eliminate certain benefits related to current strategies.

Performance Expectations – There is no guarantee that the investment and tax strategies discussed will elicit the optimal results.  Each taxpayer is unique.  Past performance or the results of other individuals is never an assurance of future results.

Reduction or Elimination of Cash Flow – Investments in real estate may experience temporary or permanent disruption of cash available for distributions, such as, from a reduction in tenant payments or if the property sustains substantial damage.

 

Potential for Property Value Loss - All real estate investments have the potential to lose value during the life of the investments.

 

Impact of Fees/Expenses – There may be substantial fees paid to Sponsors, affiliates, and others, related to the strategies and securities discussed herein and such fees typically are paid regardless of the performance of the investment or strategy you seek.    Such fees and costs may impact investor returns and may outweigh any anticipated tax benefits.

 

Liquidity Risk – Private Placements are il-liquid with no secondary market.  You should consider these long-term investments regardless of your circumstances.

 

Sponsor Risk – There are substantial conflicts of interest between investors and the self-interest of the Sponsor, Master Tenant, affiliate companies and others who will profit from the private placement for their services regardless of their results.  Their decisions related to the offering and operation of the private placement is critical to the success of the private placement and the return of your investment.  The offering sponsor could take actions that might not be in the best interests of the shareholders of the private placement.  Those types of conflicts of interest could influence the decisions in the management and operation of the private placement that are contrary to the best interests of the Investors.  Investors will have no control over their decisions.

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