Qualified Opportunity Fund – Advantages vs. Disadvantages

Qualified Opportunity Fund

Qualified opportunity funds exist as an alternative method for deferring capital gains taxes. QOFs were created by Congress to encourage investors to move their money into economically challenged areas. In this article, we are going to talk about the advantages and the disadvantages of qualified opportunity funds.

Advantages of Qualified Opportunity Funds

Qualified opportunity funds offer investors the ability to defer capital gains taxes on the sale of real estate, businesses, stocks, etc. by moving those gains into a qualified opportunity fund. If you hold your investment for 5 years, 10% of your gains will be forgiven. If you hold your investment for 7 years, another 5% of your gains will be forgiven.

Disadvantages of Qualified Opportunity Funds

The biggest disadvantage of a qualified opportunity fund is the looming deadline of 2026. Barring any future changes, any tax-deferral you have availed yourself of in a qualified opportunity zone will come due on December 31, 2026. As a result, it may be more advantageous to defer your capital gains taxes in a 1031 exchange, which has no hard deadline. With 1031 exchanges you can theoretically continue exchanging into new replacement property and defer your taxes indefinitely.

Minneapolis Like-Kind Exchanges

If you’re searching for an experienced, reputable company to handle your like-kind exchange of real estate, you’ve come to the right place! Commercial Partners Exchange Company has been facilitating real estate exchanges for more than twenty years. Our qualified intermediaries can help you through every stage of the 1031 process – answering your questions and advising you each step of the way. Contact us today at our Minneapolis office to learn more about our services and discuss the details of your real estate exchange.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

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