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By now investors have likely heard of Opportunity Zones, the economic development program offered through the Tax Cuts and Job Acts of 2017. But a large number of investors are unaware of the special flexibility afforded to those who have earned capital gains through a partnership. In fact, several of Cadre’s investors didn’t realize they had eligible capital gains to deploy until exploring this specific angle in more detail with us.

In October 2018, King & Spalding outlined this opportunity in a memo on the Proposed Regulations:

In the case of a partnership…the 180-day period begins on the last day of the partnership’s taxable year, as that is the day on which the partner would be required to recognize the capital gain if it were not deferred.1

In other words, the 180-day clock for redeployment still applies, but when the gain is generated through a partnership, there is more flexibility on when that 180-day period begins.

(Learn more in our Guide to Opportunity Zones.)

Consider the following hypothetical example:

Christine is invested in a private equity fund that sold a portfolio company and made a large distribution at the end of January 2018. That distribution is now classified as a capital gain on Christine’s Schedule K-1 from the private equity fund. Applying the standard 180-day rule, Christine’s 180-day window would have expired in July 2018. However, given the gain was generated through a partnership, she can choose to start her 180-day clock at the end of the partnership’s taxable year. This election would give Christine until June 29th, 2019 to re-invest her capital gain.

Investors who reinvest capital gains through a Qualified Opportunity Fund can capture significant tax benefits. Opportunity Zones offer the potential for capital gains tax breaks on any recently sold investment — including stocks, bonds, a private business, or real estate — so long as the gains are rolled into a Qualified Opportunity Fund within 180 days of the gains being realized.

To learn more about our Opportunity Zones Program​ or to view our current Opportunity Zone offerings, please ​request access​ to the Cadre platform.

  1. King and Spalding, October 22, 2018
About the Author
Charlie is a Vice President on Cadre's business development team. Prior to Cadre, Charlie worked at Blackstone as an analyst in the Real Estate Private Equity group. Charlie holds a B.A in Economics from Harvard College, where he graduated with honors.
Disclaimer
The views expressed above are presented only for informational and educational purposes and are subject to change in the future. Cadre makes no representations, express or implied, regarding the accuracy or completeness of this information, and the reader accepts all risks in relying on the above information for any purpose whatsoever. These materials are not intended to provide, and should not be relied upon for investment, accounting, legal or tax advice. Additionally, these materials are not an offer to sell or the solicitation of an offer to buy any securities or other instruments. Actual transactions described herein are for illustrative purposes only, are presented as of underwriting and are not indicative of actual performance, and were selected based on objective, non-performance factors such as asset-type, geography or transaction date, among others. Certain information presented or relied upon in this presentation has been obtained from third party sources believed to be reliable, however, we do not guarantee the accuracy, completeness or fairness of the information presented. Opportunity Zones Disclosure: This discussion regarding “Opportunity Zones” is based on provisions of the Tax Cut and Jobs Act of 2017 (the “Jobs Act”) and relevant guidances, including, among other things, two sets of proposed regulations issued by the IRS and Treasury Department. A number of unanswered questions still exist and various uncertainties remain as to the interpretation of the Jobs Act and the rules related to Opportunity Zones investments. As such, we cannot predict what impact, if any, additional guidance, including future legislation, administrative rulings or court decisions will have on such unanswered questions and uncertainties and there is risk that any investment marketed as an Opportunity Zone investment will not qualify for, and investors will not realize the benefits they expect from, an Opportunity Zone investment. Performance Not Guaranteed: Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections are not guaranteed and may not reflect actual future performance. Risk of Loss: All securities involve a high degree of risk and may result in partial or total loss of your investment. Liquidity Not Guaranteed: Investments offered by Cadre are illiquid and there is never any guarantee that you will be able to exit your investments on the Secondary Market or at what price an exit (if any) will be achieved. 1 Where the gain is earned through a partnership or joint venture that does not roll the gain into an O-Fund, an individual partner can choose to start their 180 day clock at the end of the tax year of that partnership. For more information, please refer to the Cadre FAQ. 2 Potentially double your after-tax profits compared to a typical portfolio refers to the calculated after-tax outcomes for a traditional portfolio and qualified opportunity fund portfolio using the After-Tax Returns Calculator above. Not a prediction or projection of investment performance. This message is not an offer of securities or invitation to make an investment. Nothing contained herein should be relied upon as a guarantee, assurance, or representation. Please refer to the investment opportunity and memorandum for additional information and disclaimers. This message was sent by RealCadre LLC, 295 Lafayette St. New York, New York 10012. You are receiving this message because you are a client of Cadre or you signed up to receive messages from us. If you do not believe you should have received this message or want to unsubscribe from this list, please reply and let us know. © 2015-2019 RealCadre LLC, all rights reserved. RealCadre LLC is registered with FINRA as a broker-dealer and is a member of SIPC.

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