It is critical to know that Opportunity Zone Funds need to first and foremost be a sound investment, with the tax incentives serving only as a secondary benefit. A properly structured Opportunity Zone Fund allows you to defer capital gains tax on the sale of ANY asset while making an investment that potentially will generate tax-free income. In this course, you’ll learn what to look for in Opportunity Zone Fund sponsors.

Join Urban Catalyst’s Chief Administrative Officer and General Counsel, Sean Raft as he gives a presentation on the federal Opportunity Zone Program. Qualified Opportunity Zone Funds such as Urban Catalyst can potentially help your clients defer and even avoid paying taxes on their capital gains tax liability while making an investment into Class-A Silicon Valley real estate. 


Learning Objectives:

• Identify federal compliance rules, regulations and timelines


• Discover benefits and reasons to pursue Opportunity Zone Funds


• Recall how to use depreciation to shelter income from the project(s) vs. when there is no depreciation recapture


• Identify implications related to federally tax-free disposition of properties upon sale


• Recall why investing in San Jose is a wise choice 

• There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;


• Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;


• Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;


• Potential for foreclosure – All financed real estate investments have potential for foreclosure;


• Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.


• Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;


• Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits


• Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing. 

• Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings.


• Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments.


• Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations.


• Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund’s holdings will not be readily available.


• Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund.


• Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments.


• Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities.


• It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable to realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.

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