Jay Frank, President, Cantor Fitzgerald Capital, and Chief Operating Officer, Cantor Fitzgerald Investment Management met with Julie Cooling, Founder & CEO, RIA Channel to discuss Opportunity Zone Investing, the current regulatory environment in Washington and critical end of year deadlines.
The Qualified Opportunity Zone Program (QOZ), introduced as a part of the Tax Cuts and Jobs Act in December 2017, offers sizable tax benefits for any individual or entity investing in job creating actives in lower income communities across the United States. After nearly four years since the program rolled out, hundreds of funds have emerged and an estimated $100 billion in assets have flowed into QOZs.
While many of the tax cuts formed during the Trump administration are on the chopping block, Frank explains that the QOZ program is one of the few initiatives in Washington with bipartisan support. On the flip side, there is a strong likelihood that income and capital gains taxes will be raised for the wealthiest of U.S. individuals and corporations in the near future. With last year’s Covid related economic slow-down and looming tax increases, 2021 is shaping up to be a banner year for OZ projects, explains Frank. QOZ investors enjoy three major tax benefits on their capital gain:
- Deferral of the original capital gain until December 31st, 2026.
- Reduction on the original capital gain of 10%. – Expires 12/31/21
- Elimination of any capital gain taxes on the new investment, if held for more than 10 years.
* The reduction benefit expires on December 31st, 2021.
Frank also weighs in on the core differences between 1031 exchanges and the Qualified Opportunity Zone Program. 1031 exchanges have been around for almost 100 years explains Frank, and during that time the number of transactions and benefits have somewhat been limited, but overall can be used by a wide range of people with investment properties. Typically Frank suggests the 1031 exchange program for real estate investors with a lot of debt and little basis and the QOZ program for investors with some basis and very little debt.
As a financial advisor, understanding the key differences between the two programs and factoring in client goals, can help show tremendous value and deepen relationships. The Cantor team works directly with advisors as a resource for education and real estate tax planning.
In 2019 Cantor Fitzgerald announced a Joint Venture with Silverstein Properties focused exclusively on Opportunity Zone Investments. Silverstein is a global real estate developer with a deep breath of experience over more than 70 years. Cantor Fitzgerald is large global diversified investment manager, specializing in real estate and is an early adopter of the Qualified Opportunity Zone programs. The 75 year old firm completed $72.3 billion in real estate transactions in 2020 alone and in the last decade has invested more than $2 billion in its commercial real estate business infrastructure.
Cantor Fitzgerald’s real estate platform offers broad access to critical market data and research, enhanced ability for diligence and underwriting, and superior deal flow enabling the ability to deliver institutional quality real estate investments to investors.
For more information: Investing in the Zone: Introduction to Qualified Opportunity Zones Tax Planning With Opportunity Zones A Solution for 2019 and 2020 Capital Gains: There is Still Time Qualified Opportunity Zone FAQ