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What Is A QOZ


Introduced as part of the Tax Cuts & Jobs Act in 2017, qualified opportunity zones encouraged investments in low-income communities across the US by providing certain tax benefits. QOFs offer an attractive tax-advantaged investment solution that may be used as a force for positive social impact and economic growth. The Treasury Department made a final publish in 12/2019, then it was amended in 2020 and 2021.

A Qualified Opportunity Zone, or QOZ, refers to economically distressed census tracts (areas) that were determined by State Govenor's and approved by The Treasury Department. State Govenor's were allowed to nominate 25% of the states qualifying areas. For an area to qualify it must meet low-income requirements based on the 2010 Census. The area either had to have a poverty rate of 20% or no more than 80% of the median household income in a Metro area or in the entire State depending on location.

A Qualified Opportunity Fund, or QOF, allows accredited individuals or entities to invest in an Opportunity Zone (QOZ) and receive the associated tax benefits allowing the deferral of almost ANY type of capital gain. Investors have 180 days after their capital gain is realized to invest in a QOF.

Three Steps

1. Investor realizes the capital gain & the 180-day countdown starts.

2. Invest into QOF and defer capital gains until 12/31/2026.

3. After 10 Years, step-up in basis, elimination of any investment appreciation taxes.

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This is for informational purposes only, does not constitute individual investment advice, and should not be relied upon as tax or legal advice. Please consult the appropriate professional regarding your individual circumstance.

There are material risks associated with investing in private placements, Delaware Statutory Trusts ("DSTs") and real estate securities including the potential loss of the entire investment principal, illiquidity, tenant vacancies impacting income and revenue, general and real estate market conditions, lack of operating history, interest rate risks, competition, including the risk of new supply coming to market and softening rental rates, general risks of owning/operating commercial and multifamily properties, short term leases associated with multi-family properties, financing risks, potential adverse tax consequences, general economic risks, development risks, long hold periods, and investors should read the PPM carefully before investing paying special attention to the risk section.

DST 1031 properties are only available to accredited investors (typically defined as having a $1 million net worth excluding primary residence or $200,000 income individually/$300,000 jointly of the last two years; or have an active Series 7, Series 82, or Series 65). Individuals holding a Series 66 do not fall under this definition) and accredited entities only.  If you are unsure if you are an accredited investor and/or an accredited entity, please verify with your CPA and Attorney.

The rules and regulations of the QOZ Program are complex, and compliance with the QOZ Program comes with significant challenges such as appreciation unpredictability, certain neighborhoods may be less accommodating to development, illiquidity for up to ten or more years, availability and cost of construction and development financing uncertainty, development and redevelopment real estate risks, as well as a number of Jobs Act interpretation uncertainty which may impact future risks, if any.

Diversification does not guarantee a profit or protect against a loss in a declining market. It is a method used to help manage investment risk.

Potential cash flows/returns/appreciation are not guaranteed and could be lower