What is the process?
Individuals who are realizing a capital gain across all asset classes can invest those monies on a tax deferred basis, as long their gain is invested in a qualified opportunity fund within 180 days of the sale or exchange. The process is very easy. Agree to subscription agreement, transfer funds, receive stock certificate and tax statement. The whole process is usually completed within 48 to 72 hours.
In certain situations where an individual is facing the expiration of the 180 day window we can expedite the process to same day.
What are the investment restrictions?
The capital gains must be invested in qualified opportunity funds that have 90% of their assets invested in qualified opportunity zones. Non capital gain money can be invested into opportunity funds however there would not be a step up in tax basis benefits for earnings of non capital gain money.
How do I qualify?
All capital gains on the sale or or exchange of any property to an unrelated party invested within 180 days are eligible for the tax benefits.
What is the minimum investment amount?
The minimum investment is $100,000.
Can I put 1031 money into a opportunity fund?
Yes. Opportunity Funds are designed to be easier with less hassle than 1031 Exchanges.
What can I invest in?
Qualified opportunity stock, partnership interest, or business property are all eligible investments. The Universal Labs Opportunity Fund is qualified opportunity stock only. Meaning you are investing in the entire interest of the fund and its holdings.
How do I invest?
Investors can invest in opportunity funds by selling an asset and triggering a capital gain, then subsequently placing that gain in a qualified opportunity fund with 180 days of the original sale. There is a subscription agreement that is signed by the investor and a wire transfer agreement. This is then followed by an execution of the agreement with a wire transfer into opportunity fund account.
How long is the investment period?
The program allows for a stepped-up basis depending on the holding period. A 5-year hold will grant the investment a 10% stepped up basis. A 7-year hold grants the investment an additional 5% of stepped up basis, totaling 15% on the original basis. Finally, after 10 years, investors permanently avoid any capital gains tax on any gains from the opportunity zone fund investment.
What is the investment rollover period?
nvestors have 180 days to invest realized capital gains.
Do I use and intermediary like I would with a 1031 exchange?
No. You can take receipt of the gains, as long as you reinvest within 180 days. As an Opportunity Fund we have to certify with the IRS. You receive a tax statement at the end of the year.
Do I have to pay the original deferred taxes?
In part. The original taxes are deferred until December 31, 2026 (or the date of a sale, whichever is earlier). Investors will have to recognize a portion of the deferred gains that year. Investors may benefit from the step up in basis at years 5 (10%) and 7 (another 5%) if they reach either holding period before December 31, 2026.
Where are opportunity zones?
Opportunity zones are currently being designated by the governors of each state. Each state may designate 25% of the eligible census tracts in their state. As of right now, all 50 states and Puerto Rico have submitted and have been approved for designated Opportunity Zones.
Are all designated opportunity zones economically distressed?
No. Opportunity zones must meet certain criteria to qualify. Census tracts with over 20% poverty and median family income no greater than 80% of the area medium will qualify. There are also contiguous zones, which are census tracts that are adjacent to a designated opportunity zone, and also do not exceed 125% of the median family income of that same opportunity zone.
Can I put non capital gains into a opportunity fund?
Yes. New monies can be invested in an opportunity fund, however the investor would not enjoy the same tax benefits as realized capital gains.
What happens if an investment fails?
These investments carry the same market risk that comes with all investments. The funds 10-year investment period mean a greater chance of the investment living through a market cycle; while at the same time providing the manager with flexibility to maneuver different market fluctuations. However, the historical rate of appreciation is 7.3% Nationally over the last 100 years. Given a longer term outlook the stand alone value of the property in theory will naturally increase over time.