How Fund Managers May Deploy Opportunity Zone Funds to Defer and Partially Eliminate Capital Gains

Tax-advantaged “Opportunity Zones” (OZs) were established by the 2017 Tax Cuts and Jobs Act. In accordance with the new OZ statute and proposed regulations, investors may be able to defer – and partially eliminate – recognition of gains by investing the proceeds of appreciated investments in a so-called “qualified opportunity fund” (QOF) that invests in OZs. Because of their similarity to private equity funds, QOFs can provide sponsors with a path to significant tax benefits and investment opportunities. A recent Akin Gump program provided a comprehensive overview of the new OZ regime. The program was moderated by Akin Gump partner Lucas F. Torres and featured partners Susan H. Lent, John J. Marciano III and Ron G. Nardini, as well as senior adviser Geoffrey K. Verhoff. This article summarizes the key takeaways from the program. For additional commentary from Akin Gump attorneys, see our two-part series: “Understanding the CFIUS Review Process and How to Structure Investments to Minimize Regulatory Risk” (Apr. 2, 2019); and “FIRRMA Expands the Scope of Transactions Subject to CFIUS and Lengthens the Target Acquisition Timeline” (Apr. 9, 2019).

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