Qualified Opportunity Funds

Qualified Opportunity Funds spur economic development in low-income census tracks, while giving investors attractive tax benefits . They are designed to provide an aggressive investment of patient capital in certain low-income areas.

Opportunity zone definition

A Qualified Opportunity Zone is a low-income census tract certified by the U.S. Treasury. Qualified businesses operating within a Zone are eligible for Qualified Opportunity Fund investment.  To be Qualified, a business must conduct substantially all of its business within a Qualified Opportunity Zone and offer limited partnership or equity (stock) interests or business property purchasing opportunities available to Qualified Opportunity Fund investors.

Investment benefits of Qualified Opportunity Funds

Taxpayers who invest capital gains in Qualified Opportunity Funds within 180 days of realizing the gain will defer payment of the capital gains tax until December 31, 2026, receive reductions in the amount of capital gains tax paid, and have the opportunity to grow the investment capital gains tax free. Investors who are looking to defer and reduce capital gains and grow their investment tax free should consider investing in Qualified Opportunity Funds.

Opportunity Zones in Pennsylvania

Pennsylvania Opportunity Zones

1855 Capital Opportunity Zone Fund Strategy

The 1855 Capital Qualified Opportunity Fund will invest in companies located in Qualified Opportunity Zones predominantly, if not exclusively, in Pennsylvania. This fund will invest in both early and late stage equity financing, and when possible, will invest alongside 1855 Capital – Fund 1 and other strategically identified Funds.

Investments will span a broad set of industries including: information technology, advanced materials, fintech, edtech, healthcare and medical devices. We will evaluate investment possibilities for all great ideas lead by great entrepreneurs.

Tax benefits of Opportunity Zones

Qualified Opportunity Fund investments offer individual and corporate taxpayers the chance to defer and reduce capital gains taxes from the sale of certain assets by investing those proceeds in a Qualified Opportunity  Fund.

Additionally, gains made from investments into Qualified Opportunity Funds may be free of capital gains tax.

  • Deferral of tax liability of the gains invested until December 31, 2026
  • A 10% step up in basis of the originally invested gain if the investment is held in the Fund at least five years
  • A 15% step up in basis of the originally invested gain if the investment is held in the Fund at least seven years
  • If the investment is held in the Fund for at least 10 years, any gain on the Qualified Opportunity Zone investment is federal capital gains tax-free

Qualified Opportunity Fund Investment Illustration

Taxpayer sells an asset in August of 2018 and realizes a $1,000,000 gain that will be taxed federally as a capital gain.  On December 1, 2018, within the 180-day election period, Taxpayer invests the $1,000,000 into a Qualified Opportunity Fund and acquires a Limited Partnership interest in the Fund.

As a result of rolling the capital gains into the Qualified Opportunity Fund, Taxpayer may defer payment of the capital gains tax until December 31, 2026.

If the Fund holds Taxpayer’s investment for at least five years, the Taxpayer will receive a 10% step-up in basis, which reduces the basis in the investment for tax purposes to $900,000.  This results in a tax savings to the Taxpayer.

If the Fund holds Taxpayer’s investment for at least seven years, the Taxpayer will receive a 15% step-up in basis, which further reduces the basis in the investment for tax purposes to $850,000.  This results in additional tax savings to the Taxpayer.

If the Fund holds Taxpayers investment until December 31, 2026, the Taxpayer will then have to pay the capital gains on the initial investment, as may be adjusted due to an applicable step-up allowance.

If the Fund invested the $1,000,000 money in Qualified Opportunity Zone Business Property, the investment appreciates by $750,000, and the Fund wraps up prior to December 1, 2028 (ten years from the date of the initial investment), the Taxpayer will realize a $750,000 gain and pay capital gains tax.

If the Fund invested the $1,000,000 money in Qualified Opportunity Zone Business Property, the investment appreciates by $750,000, and the Fund wraps up after December 1, 2028 (ten years from the date of the initial investment), the Taxpayer will not realize a gain requiring the payment of capital gains tax on the $750,000 appreciation.

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Disclaimer

The information featured on this page is for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any interests in the 1855 Capital Qualified Opportunity Zone Fund (the “Fund”) or any other securities. Any such offering may only be made in accordance with the terms and conditions set forth in an Offering Memorandum. Investment in the Fund is suitable only for accredited investors who fully understand, and are willing to assume, the risks involved in an investment in the Fund. Opportunity funds, by their nature, involve a substantial degree of risk, including the risk of total loss of an investor’s capital. The offering of interests in the Fund will be made in reliance upon an exemption from registration under the United States Securities Act of 1933, as amended, for offers and sales of securities that do not involve a public offering.