What are the Tax Incentives for Investors?

  1. Temporary Tax Deferral: An investor may defer recognition of income associated with any current capital gains realized (but not yet recognized for federal tax purposes by the private investor) that are reinvested into an Opportunity Fund.

  2. Basis Step-Up: An investor is granted a step-up in the basis of any current capital gains reinvested into an Opportunity Fund.  The private investor's basis in his or her original investment is increased by ten percent (10%) of the amount of the unrecognized capital gain if the Opportunity Fund investment is held for a minimum of five (5) years, and fifteen percent (15%) if the investment is held for a minimum of seven (7) years.  The effect of the step-up in basis is to reduce the amount of the re-invested capital gain that is subject to tax. 

  3. Permanent Exclusion: Long term investments in Opportunity Funds are encouraged because private investors are granted a permanent exclusion of any future capital gain income realized upon the sale or exchange of an investment in an Opportunity Fund if the investment is held for at least ten (10) years.  Thus, in such a case, a private investor would be permitted to exclude the entire amount of gain an investment accrues after the initial investment is made into the Opportunity Fund.

Opportunity Funds