Qualified opportunity funds are a new tax-planning strategy created by the Tax Cuts and Jobs Act tax reform.
The new funds have the ability to defer current-year capital gains, eliminate some of them later, and then on the new investment make capital gains tax-free. To put the benefits in place, you need to navigate some new rules and time frames.
To make this as clear as I can with as few words as possible, I’m going to use this example: On December 1, 2018, you sell $8 million of stock with a cost basis of $3 million for a long-term capital gain of $5 million.
Overall, you have a total of $10 million in gains from these transactions: $5 million from 2018 and $5 million in 2028. Using the qualified opportunity fund investment strategy, you:
For this strategy to make great financial sense, you need (a) appreciation in your qualified opportunity fund and (b) to hold the investment for at least 10 years so that the appreciation is tax-free to you when you sell your investment.
If you have a capital gain on which you don’t want to pay taxes and the opportunity fund sounds, please do not hesitate to reach out to your team at Luster Tax Consulting to work through this with you. Please use the following link to book your complimentary strategy call with your team at Luster Tax Consulting.
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