Investing in Opportunity Act

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Investing in Opportunity Act

Post by psteinx » Fri Aug 17, 2018 1:27 pm

So, late in 2017 (I think), among other tax changes, there was something called the Investing in Opportunity Act

Some discussion links here: ... b6223b1f1f ... tunity-act ... eds-areas/ ... t-vehicles

It's hard to parse the information, without a deep dive anyways (that I haven't made). But I *think* it works something like this:
* There are/will be zones designated in economically challenged areas. This act is aimed to encourage investments in those areas.
* I think, but am far from sure, that such investments are not limited to pure real estate, but may include businesses and such in the areas in question
* The act allows both direct investments, and funds that pool investments, making access to this potentially much easier for passive investors. For simplicity, I'll refer to such prospective funds as IOA funds (I'm not sure there's a clearly established nomenclature).
* There are some potentially very significant tax benefits to investors to do this. It sounds like you can sell some other investment with a large unrealized gain (say, shares of Apple), invest the proceeds in a qualifying fund, and get full tax deferral on the gains for up to 10 years. As a (potentially big) cherry on top, it seems there are further tax benefits if you keep the investment for 10 years - no capital gains taxes. I'm not sure if that's no taxes just on the part of your gains (if any) from investment in the IOA fund.

So, in theory, to the investor it could look something like this:
Has $100K of Apple stock with a basis of $20K
Sells the $100K of Apple stock, invests in an IOA fund.
Holds the IOA fund for 10 years
The IOA fund increases in value to $150K. (Then self liquidates? Or offers investor redemptions? Or there's a secondary market in these things? Unclear...)

The investor then has $150K in proceeds, and possibly owes no tax on the last $50K in cap gains, or perhaps even the full $130K. (Again, I'm really unclear).


Anyways, these things LOOK interesting. But the exact mechanics are obviously unclear to me (and please take everything in this post with a grain of salt). Furthermore, I haven't yet identified any operating/fundraising IOA funds.

Has anyone delved deeper into this topic? Thoughts/information?

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