The following slides explains the Opportunity Zone investment program and Opportunity Fund requirements per The Tax Cuts and Jobs Act of 2017. Author Rocco Forino

1. ROCCO FORINO CAPITAL COPYRIGHT 2019

2. The Tax Cuts and Jobs Act of 2017 (“The Act”) provides for the creation of
“Opportunity Zones” (“OZ”) which are specially created geographic
districts “distressed communities” that allow investors to receive
substantial tax breaks when deploying investment capital into these
Opportunity Zones.
Opportunity Zones are essentially “distressed communities or
neighborhoods” and fall within the definition of Impact Investing
Investors must invest through newly created “Opportunity Funds” that
purchase real estate or invest in businesses located in Opportunity Zones
Investors may reinvest capital gains from any existing investments into an
Opportunity Fund in order to defer or reduce those capital gains taxes
After the investment is held for five years, the total tax basis in the
original investment in increased by 10%, and after 7 years, the tax basis is
increased by 15%
After 10 years, investors permanently avoid any capital gains tax on the
post-acquisition gains
Opportunity Fund Introduction
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3. Tax Cuts and Jobs Act of 2017:
“Property is considered to be substantially improved if, during any 30-month period
beginning after the date of acquisition of such property, additions to basis with
respect to such property in the hands of the qualified opportunity fund exceed an
amount equal to the adjusted basis of such property at the beginning of such 30-
month period in the hands of the Qualified Opportunity Fund.”
Interpretation:
It is considered “Substantially Improved” if the property is improved by over 100% of
the basis within 30 months of acquisition. The reference to adjust basis means the
adjusted basis of any preexisting tangible property in an Opportunity Zone at the
end of 30-month period following acquisition.
Substantially Improved
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4. Opportunity Zone Basics
ROCCO FORINO CAPITAL COPYRIGHT 2019

5. Opportunity Zones are a new economic development program established by Congress under the Tax Cuts and
Jobs Act of 2017 to encourage long-term investments in certain distressed communities or low-income (LIC)
census tracts in each of the 50 States
Many eligible census tracts also include middle and higher end communities
For example, portions of Brooklyn, New York have been designated as OZ
Areas eligible for OZ designation must have a median family income no greater than 80% of the area median
and a 20% or greater individual poverty rate
A good amount of commercial and industrial areas in the U.S. are eligible
Non-LICs may also be designated as an OZ under certain circumstances
Opportunity Zones
Timeline of Opportunity Zone Designation
December 22, 2017
the Tax cuts and Jobs Act
was approved by Congress
March 21, 2017
Nomination of OZ by state governors
With a possible 30-day extension
April 20, 2018
Determination of OZ by the Treasury
With a possible 30-day extension
10 Years
Designated OZ’s will stay in
place for ten years and can be
modified.
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6. By statute, a qualified Opportunity Fund is a private investment vehicle organized as either a corporation or a partnership that invests
or holds at least 90 percent of its assets in a qualified Opportunity Zone business or property.
These corporate and partnership investments must be made in cash and cannot be in-kind contributions or promissory notes. The
eligible activities and projects that the Fund can support are broad, from commercial and industrial real estate, to housing,
infrastructure, and existing or start-up businesses.
What Is an Opportunity Fund?
Investments qualify for Opportunity Zone business designation when:
A business is acquired by purchase;
Most of the tangible property owned or leased by the taxpayer in the execution of their business activity is
qualified Opportunity Zone business property;
At least 50 percent of their business’ total gross income is derived from its meaningful management and operation;
A substantial portion of the business’ intangible property is used in the active conduct of the trade or business;
Less than five percent of the average aggregate unadjusted basis of their property is attributable to non-qualified financial
property; and
The business is not a private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility,
racetrack or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for
consumption off premises.
Investments qualify for Opportunity Zone business property designation when:
A property was acquired by the qualified Opportunity Fund after 2017;
The property began to be used when the qualified Opportunity Fund began operating in the Opportunity Zone;
The qualified Opportunity Fund substantially improved the property;
During the qualified Opportunity Fund’s holding period, almost all of the use of the property was in a qualified Opportunity
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7. An Opportunity Fund (“OF”) is an investment vehicle organized as a corporation or
partnership that specializes in aggregating private investments and deploying that capital in
Opportunity Zones
Opportunity Fund Tax Deferral Timeline:
Opportunity Fund Incentives
Deferral of Capital Gains Taxes
Gains rolled into an OF
Within 180 days of Sale
2018 Year 5: 2023 Year 7: 2025 December 31, 2026 Year 10: 2028
Step-up in Basis Permanent Elimination
Tax on original gain is
Reduced by 10%
Tax on original gain is reduced by
An additional 5%, to 15%
Deferred tax on original gain is due.
Investors need to pay tax on 85% of
Original capital gains
Upon sale, no tax on post
Acquisition gains/ OF interest
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Capital gains from the sale of any asset (if
reinvested with 180 days) are deferred until the
sale of the new investment, or December 31, 2026
whichever is earlier
Investments held for 10 years will pay no
capital gains tax on the post acquisition
gains. This permanent exclusion only
applies to the gains accrued in an
Opportunity Fund
ROCCO FORINO CAPITAL COPYRIGHT 2019
Any investment re-invested and held for 5 years
gets a tax basis increase of 10% and any
investment held for 7 years gets a tax basis
increase of 15%, thereby reducing the original
capital gains by that amount
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8. Other tax benefits from the recently passed Tax Reform Act can be combined with the OZ tax benefits to offset income
Expanded Options for Expensing & Bonus Depreciation
Other Tax Benefits Can Be Combined With OZ’s
100% Expensing
Increased Expensing Cap
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Allows 100% expensing for qualified property 1 placed in service before 2023;
Immediate expensing is then phased down by 20% each year until 2026
Expands first year accelerated depreciation for investments in qualified tangible property, including many
categories of equipment and non-real estate capital assets.
50% to 100% of all new investments in assets acquired and placed in service after September 27, 2017 are
subject to a phase down schedule following December 31, 2022.
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Raised the Section 1792 expensing cap from $500,000.00 to $1 million, and the phase-
out threshold amount to $2,500,000.00
Accelerated Depreciation3
Notes:
1. Qualified property generally is limited to non-real property with assets lives under 20 years
2. The United States Internal Revenue Code
3. For more information on tax reform, please visit the IRS website
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9. Opportunity Zone Investments offer different tax benefits than section 1031 Exchanges
Section 1031 Versus Opportunity Zones
Comparison of Section 1031 & Opportunity Zone Fund
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Section 1031 Opportunity Zone Fund
Eligible asset classes Only 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 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
December 31, 2026
Zero Capital gains tax after 10
years
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10. If an investor has a realized capital gain of $250,000.00 he can reinvest in a fully taxed portfolio:
Seven year hold in a Fully Taxed Portfolio:
1. 10% annual investment appreciation
2. 20% combined tax rate
Opportunity Fund Versus Fully Taxed Investment
Capital Gain $250,000.00
Initial Tax Payable (20%) $50,000.00
Total after tax Capital to Invest $200,000.00
Invested in an Fully Taxed Portfolio $200,000.00
Asset Sale Price after 7 years $300,000.00
Appreciation $100,000.00
Tax on Appreciation $20,000.00
Total Tax $70,000.00
After Tax Funds $280,000.00
After Tax Net Returns 12%
$70,000.00 Total Tax
ROCCO FORINO CAPITAL COPYRIGHT 2019
** This slide is only a hypothetical illustration of mathematical principals as it relates to the new tax code and
does not predict the performance of a specific investment or investment strategy.
$280,000.00 After Tax
Net Returns
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11. If an investor has a realized capital gain of $250,000.00 he can reinvest in an Opportunity
Fund:
Seven year hold in an Opportunity Fund:
1. 10% annual investment appreciation
2. 20% combined tax rate
Opportunity Fund Versus Fully Taxed Investment
Capital Gain $250,000.00
Initial Tax Payable -
Total after tax Capital to Invest $250,000.00
Invested in an OZ Fund $250,000.00
Asset Sale Price after 7 years $350,000.00
Basis Adjustment $212,500.00
Deferred Capital Gains Tax ( LT
Cap Gain 20%)
$42,500.00
Appreciation $100,000.00
Tax on Appreciation $20,000.00
Total Tax $62,500.00
After Tax Funds $287,500.00
After Tax Net Returns 15%
Initial $250,000.00 Capital
Gain $37,500.00
15%Tax Exempt
QOF 7 Year (Hypothetical)
$62,500.00
$62,500.00 Total Tax
ROCCO FORINO CAPITAL COPYRIGHT 2019
** This slide is only a hypothetical illustration of mathematical principals as it relates to the new tax code and
does not predict the performance of a specific investment or investment strategy.
$212,500.00 Taxable 85% $287,500.00 After Tax
Net Returns
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12. If an investor has a realized capital gain of $250,000.00 he can reinvest in an Opportunity
Fund:
Ten year hold in an Opportunity Fund:
1. 10% annual investment appreciation
2. 20% combined tax rate
Opportunity Fund Versus Fully Taxed Investment
Capital Gain $250,000.00
Initial Tax Payable -
Total after tax Capital to Invest $250,000.00
Invested in an OZ Fund $250,000.00
Asset Sale Price after 10 years $350,000.00
Basis Adjustment $212,500.00
Deferred Capital Gains Tax ( LT Cap Gain 20%) $42,500.00
Appreciation $100,000.00
Tax on Appreciation $0.00
Total Tax $42,500.00
After Tax Funds $307,500.00
After Tax Net Returns 23%
Initial $250,000.00 Capital
Gain $37,500.00
15%Tax Exempt
QOF 7 Year (Hypothetical)
$42,500.00 Total Tax
ROCCO FORINO CAPITAL COPYRIGHT 2019
** This slide is only a hypothetical illustration of mathematical principals as it relates to the new tax
code and does not predict the performance of a specific investment or investment strategy.
$212,500.00 Taxable 85%
$307,500.00 After Tax
Net Returns
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13. www.roccoforinocapital.com
Email: rocco@RocForCap.com
CONTACT
ROCCO FORINO CAPITAL COPYRIGHT 2019
Rocco Forino, Managing Partner
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