Professor Michelle Layser, an expert on the intersection of tax law and social policy, was recently quoted in a Law360 article on opportunity zones as investment vehicles.
The "opportunity zone" fund, or OZF, became available after President Donald Trump signed the Tax Cuts and Jobs Act and is designed to help communities in need by investing unrealized capital gains into building and job creation projects in those low-income areas. Efforts have been made to incentivize investors - when an unrelated asset is sold and those capital gains are reinvested in a qualifying OZF, the taxpayer can defer tax on the gains until Dec. 31, 2026, and all taxes are forgiven on gains from investments held in opportunity funds for at least 10 years.
Layser says it is hard to conclude whether OZFs are a good investment in terms of returns. She also commented on the tax benefits offered in real estate investments (Code 1031) in comparison to OZFs.
"But not all taxpayers can use 1031," Layser said. "That rule is only available to taxpayers who have capital gains from selling real property held as an investment or for business use. The OZF rules are available for taxpayers who have capital gains from any sale. So it has the potential to sweep in a ton of taxpayers who can't use 1031."
Read the full article.