Opportunity Zones are one of the hottest topics in both the finance and real estate industries today, and for good reason. The tax advantages offered by investing in Qualified Opportunity Funds – like the Caliber Tax Advantaged Opportunity Fund, LP – make up what many believe to be the best capital gains tax reduction programs of a generation.
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Created by the Tax Cuts and Jobs Act of 2017, opportunity zones are fairly new, and many investors are trying to determine how these new funds stand up against other tax deferred investment vehicles. Most often the opportunity funds are compared to the 1031 Exchange.
While similar in many ways, there are some very important distinctions to note between the two.
| Opportunity Zones | 1031 Exchange | |
|---|---|---|
| Overview | Created as part of the 2017 Tax Cuts and Jobs Act, Opportunity Zone Funds allow for a reduction in capital gains tax through investments in qualified areas and projects. | Under section 1031 of the Internal Revenue Code, a taxpayer may reinvest capital gains from the sale of one property into a new property to defer all capital gains taxes. |
| Timeline | Identification of reinvestment - no time requirement. Closing on reinvestment 180 days. | Identification of reinvestment - 45 days. Closing on reinvestment 180 days. |
| Property | Does not need to be like-kind. Can be real or personal property. Gain from any source: stocks, real estate, business sale, etc. | Must be like-kind. Must be real property. |
| Investment | Only the capital gain must be reinvested. | Entire proceeds from sale must be reinvested. |
| Partnership Interests | Allowed | Not Allowed |
| Corporate Stock | Allowed | Not Allowed |
Investor Considerations
The information contained herein is general in nature and is not intended, and should not be construed, as accounting, financial, investment, legal, or tax advice, or opinion, in each instance provided by Caliber or any of its affiliates, agents, or representatives.
The reader is cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances, desires, needs, and requires consideration of all applicable facts and circumstances. The reader understands and acknowledges that, prior to taking any action relating to this material, the reader:
(i) has been encouraged to rely upon the advice of the reader’s accounting, financial, investment, legal, and tax advisers with respect to the accounting, financial, investment, legal, tax, and other considerations relating to this material
(ii) is not relying upon Caliber or any of its affiliates, agents, employees, managers, members, or representatives for accounting, financial, investment, legal, tax, or business advice, and
(iii) has sought independent accounting, financial, investment, legal, tax, and business advice relating to this material. Caliber, and each of its affiliates, agents, employees, managers, members, and representatives assumes no obligation to inform the reader of any change in the law or other factors that could affect the information contained herein.
Investor considerations continued
This overview is for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any interests in the Caliber Tax Advantaged Opportunity Zone Fund, LP (CTAF) or any other securities. Any such offer will be made only pursuant to CTAF’s Private Placement Memorandum, as amended and restated, and other offering documents.
This overview may include or be based in part on projections, valuations, estimates and other financial data supplied by third parties, which have not been verified by CaliberCos, Inc., its affiliates or CTAF. This information should not be relied upon for the purpose of investing in CTAF or for any other purpose.
Any information regarding projected or estimated investment returns are estimates only and should not be considered indicative of the actual results that may be realized or predictive of the performance of CTAF or any underlying assets in which the Fund invests. Past investment results of any underlying managers should not be viewed as indicative of future performance of CTAF.
Prior to investing, investors are strongly urged to review carefully the Private Placement Memorandum (including the risk factors described therein), the Limited Partnership Agreement of CTAF and the subscription documents, to ask such questions of the general partner as they deem appropriate, and to discuss any prospective investment in the Fund with their legal and tax advisers in order to make an independent determination of the suitability and consequences of an investment.
Investment in CTAF is suitable only for sophisticated investors for whom an investment in the CTAF does not constitute a complete investment program and who fully understand, and are willing to assume, the risks involved in an investment in CTAF.
To learn more about opportunity zones or how Caliber can help manage your investment and protect your capital gains, contact us today.