Opportunity Zone [pursuant to Subchapter Z of the Internal Revenue Code] promotes investments in certain designated distressed low-income communities with HUGE tax benefits: temporary gain deferral, basis adjustments and a permanent exclusion on the appreciation of the investment; really!!

1. QUALIFIED OPPORTUNITY FUND
MARKS PANETH LLP
MICHAEL W. HURWITZ, MST, CPA
REAL ESTATE PRACTICE
REIT GROUP LEADER
C: 646.499.0634
O: 212.201.2230
Disclaimer: the information contained in this presentation is for general guidance on matters of interest only. The application and impact of laws can
vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, the information presented herein is subject to
change. Accordingly, the information in this presentation is provided with the understanding that the author and Marks Paneth LLP are not engaged in
rendering legal, accounting, tax, or other professional advice and services. As such, this presentation should not be used as a substitute for
consultation with professional accounting, tax, legal or other competent advisors. Before making any decision or taking any action, you should consult
an accounting, tax, legal or other competent advisor.

2. CURRENT INVESTMENT
Taxpayer holds non-opportunity zone investment such as stock, partnership
interests, art work, collectibles, real estate and / or property used for
personal purposes.
Example – current investment:
Fair market value equals $1,200,000
Less: initial cost basis equals $200,000
Equals potential capital gain / appreciation or $1,000,000

3. SALE OF ASSET – NO DEFERRAL
Taxpayer sell asset and pays Federal and State taxes [Federal long and
short term rates of 20% and 37%, respectively].
Example – sale of asset:
Capital gain / appreciation of $1,000,000
Less Federal and State taxes

4. SALE OF ASSET – REINVESTED
Taxpayer sell asset and reinvests (rolls over the capital gain) within 180 days
into a certified Qualified Opportunity Fund (“QOF” or an investment in a
distressed, low income community designated by the governors of the
states).
Example – sale of asset:
Capital gain / appreciation of $1,000,000
Reinvests capital gain into a Qualified Opportunity Fund
QOF
$1M

5. THREE DISTINCT TAX BENEFITS
1) A temporary tax deferral of the initial capital gain that are reinvested
into a QOF. The gain will be deferred until the earlier of: the date on
which the investment in the QOF is sold, or December 31, 2026!
2) A capital gain reduction through a basis adjustment for capital gains
reinvested into a QOF. A taxpayer who holds an investment in a
QOF for at least five years can increase his investment basis by 10%
of the deferred gain (and an additional 5% if the investment is held
for seven years), thereby eliminating potentially 15% of the original
gain from taxation!
3) A permanent gain exclusion on the appreciation of the interest in the
QOF. If the taxpayer hold the interest in a QOF for at least 10 years,
NO tax will be due on the appreciation of the QOF; (other than 85%
of the original gain the must be recognized by December 31, 2026).

6. TIMELINE [BASIS ADJUSTMENTS]
QOF
QOF
QOF
Year 5: $100K basis adjustment
Year 7: $50K basis adjustment
On December 31, 2026: Gain
recognition equal to the lesser of the
initial gain (of $1M) less the basis
adjustments (of $150K) or the fair
market value of the QOF

7. SALE OF QOF
Taxpayer holds QOF for at least 10 years! Upon the sale of the investment,
the taxpayer receives a step up in basis to the fair market value and
recognized no gain upon the ultimate disposition!
Example – sale of QOD:
Appreciation to $1,450,000
No taxation due on the $450K appreciation!
QOF
$1M

8. OPEN ITEMS
As with many of the new provisions in the Tax Cuts and Jobs Act,
there are several key issues the Treasury Department's will need to
provides further guidance and clarity on including:
• Whether or not Internal Revenue Code Section 1231 property is
intended to be covered by this new provision / program
• Whether or not the taxpayer reinvests the sales proceeds of just the
capital gain; if the former what happens upon disposition of the QOF
• Whether or not a formal election is required to be made and is so, how
is the elections made
• Guidance on the 10 year hold requirement as it relates to investments
made in 2019 and subsequent years

9. THANK YOU
MARKS PANETH LLP
MICHAEL W. HURWITZ, MST, CPA
REAL ESTATE PRACTICE
REIT GROUP LEADER
C: 646.499.0634
O: 212.201.2230