Our fund invests in the official Opportunity Zone designated by the US Department of the Treasury / State of Colorado. This federally-approved designation allows for:
1) NO LONG TERM CAPITAL GAINS TAXES: For an investment held for 10 years within the Zone. Investments include those made for operating businesses, equipment, and real property (both real estate and infrastructure).
2) 36% HIGHER ADDITIONAL RETURN: For investments within the zone, when compared to an alternative investment with a 7% annualized return.
*Assuming a long term capital gains savings of 23.8% and assuming 7% appreciation compounded over ten years
RULES WE MUST FOLLOW FOR YOU:
A) A qualified Opportunity Fund is a privately managed investment vehicle organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (the vehicle must hold at least 90 percent of its assets in such property). The Colorado Governor designated 25 percent of the state’s low-income census tracts as qualified opportunity zones, subject to certification by the U.S. Secretary of the Treasury. Low-income census tracts are defined in Internal Revenue Code Section 45D(e). If the number of low-income census tracts in a state is less than 100, then a Governor may designate a total of 25 tracts. There are many opportunity zones in Colorado, but we focus mainly on Montrose, Delta, Telluride, and the highway 550 corridor of the Western Slope. Qualified opportunity zone property includes any qualified opportunity zone business stock, any qualified opportunity zone partnership interest, and any qualified opportunity zone business property. Only taxpayers who roll over capital gains of non-zone assets before December 31, 2026, will be able to take advantage of the special treatment under this provision.
Let’s say Investor A has $10,000 of unrealized capital gains in her stock portfolio (She sold some Apple/AAPL).
She decides in 2018 to reinvest those gains into our Western Slope Oz fund (This fund, that invests in distressed areas of her home state of Colorado). Investor A then holds this Fund/Investment for 10 years. She is able to defer the tax she owes in 2019 on her original $10,000 of capital gains until 2026. Yes , she can keep the principal, and just invest the capital gains!
Furthermore, the basis decreases by 15% (effectively reducing her $10,000 of taxable capital gains to only $8,500). Thus, she will owe $2,000 (23.8% of $8,500) of tax on her original capital gains when the bill finally comes due.
Additionally, because she holds her O-Fund investment for at least 10 years, she owes no capital gains tax on “The Fund’s” appreciation. Assuming that her O-Fund investment grows at 7% annually (which we will likely achieve and are shooting for more like 10-20%)*, the after-tax value of her original $10,000 investment in 2028 is $17,600.**
Investor A has enjoyed a 5.8% effective annual return, compared to the 2.8% EAR an equivalent non-O-Fund investment would have delivered.
Total tax in 2028: $2,000
After-tax value of investment in 2029: $17,600
Effective after-tax annual return on $10,000 capital gain in 2019: 5.8%
*Historically, we have generated 25% ROI in under 6 months for an annualized ROI of over 50%. Past performance is not indicative of future returns
**This does not constitute an offer of securities or investment, or investment advice as WesternSlopeOz is not a registered investment advisor
* The hold time has to be 10 years for the “full” tax free gains shown