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A New Investment “Opportunity”

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Option to defer your capital gains by investing in a newly created Opportunity Fund.

If you have realized a gain, such as from the, you now have the ability to reinvest those gains, and defer the associated taxes until 2026.

The Tax Cuts and Jobs act created a new investment vehicle called Opportunity Funds.  These funds are holding companies that must develop real property or provide startup funding to new businesses in designated Opportunity Zones.  These areas are similar to Colorado’s existing enterprise zones as being targets for economic development.  When you have realized a gain from the sale of property to an unrelated party, you can invest the gain into an Opportunity Fund and defer tax recognition until you sell your interest in the fund, or December 31, 2026, whichever comes first.

There are additional long-term benefits for holding an investment in an Opportunity Fund.  If you have held your investment for 5 years, the deferred gain can be reduced by 10%, and after 7 years, an additional 5% for a total of 15%.

For example, if you sell stock in 2019 and realize a gain of $20,000, you could invest the gain amount into an Opportunity Fund and avoid paying taxes on that gain in 2019.  If you hold that investment for at least 7 years, you will recognize a gain of only $17,000 in 2026.  Not only do you defer paying taxes on the gain, but a portion of the gain is tax free.

Approved Opportunity Zones in Colorado are located in many areas including large tracts of the eastern plains and western slope, Fort Collins, Longmont, Brighton, Avon, Leadville, Colorado Springs, Pueblo, and many areas around the greater Denver Metro area.

Detailed information can be found at https://choosecolorado.com/opportunity-zones/.  Please contact us if you would like to discuss this new opportunity for tax savings.

*This document is for informational and illustrative purposes only.  It is not, and should not be regarded as, “investment advice” or as a “recommendation” regarding a course of action.  Seek a duly licensed professional for investment advice.

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