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An OZ Tax Shelter For Magnificent Seven Capital Gains

Advisors And Investors Rebalancing Big Cap Tech Have A Tax Haven 

This past week, the stock market witnessed profit-taking in the vaunted Magnificent Seven stocks— Apple, Microsoft, Nvidia, Amazon, Meta, Tesla and Alphabet—where the AI buzz is most prominent, along with several other mega-tech stocks that have posted year-to-date gains. It seems to me that the market is conducting a gut check as to just how euphoric stock prices should be when only a handful of companies have demonstrated the ability to monetize all things AI to date.

In my opinion, it was bound to happen. Momentum begets momentum, but I think when there is a blow-off top that sweeps across one of the market’s favorite sectors (technology), then for many stocks, the highs could be in for the year. Whatever the case, a lot of investors that rode the first half of the market to the fullest and could have rang the register this past week and are probably sitting on extensive short and long-term capital gains.

Some of this selling pressure is likely a byproduct of a reduction in the weightings of big tech stocks in portfolios, as price appreciation may have led to concentrated positions. Advisors and fund managers who did rebalance their portfolios, and who harvested profits in the process, could have created capital gains tax obligations that can be offset with the purchase of equal amounts of interest in a Qualified Opportunity Zone Fund (QOF). Managing year-to-date capital gains can be a challenge when trying to pair off gains with losses to reduce estimated taxes, but not so when utilizing dollar-for-dollar reinvesting in QOFs.

Belpointe PREP, LLC (“Belpointe OZ”) (NYSE American: OZ) is the first publicly traded multi-asset QOF currently targeting four of what we believe are among the strongest markets for long-term growth: Sarasota, Florida, St. Petersburg, Florida, Nashville, Tennessee, and Storrs/Mansfield, Connecticut. With several full-featured Class A multifamily projects at various phases of development in the pipeline, I believe Belpointe OZ is laying the groundwork for robust potential investment returns for the next decade and beyond.

Being a publicly traded security, RIAs and investors alike can buy matching amounts of Belpointe OZ’s Class A units that can be used to offset capital gains. But there is one caveat. Interests in QOFs need to be established within 180 days of when the capital gains are realized. By purchasing Class A units in Belpointe OZ (NYSE American: “OZ”), investors can take advantage of the 180-day look-back window that allows capital gains realized since late January 2023 to be offset and not recognized until December 31, 2026.

There’s something to be said for selling into extreme strength and deploying the gains into assets trading at a discount to stated value. Belpointe OZ recently announced its unaudited quarterly net asset value (“NAV”) as of March 31, 2023, of $351.7 million or $99.82 per Class A unit. Class A units of OZ, as of July 21st, are trading at around $85, nearly a 15% discount to NAV. It’s my view that the existing home inventory in the key markets where Belpointe OZ is investing will remain highly challenged, and that demand for luxury apartment living may provide a viable alternative to hundreds and thousands of potential home buyers struggling with affordability and high mortgage rates.

Speaking of selling into strength, how about the ongoing increase in residential home prices within desirable markets? There is an alternative to rolling into another like-kind property with 180 days.

A Viable Alternative to 1031 Tax Free Exchanges

We’ve seen a pickup in interest from property owners about how Belpointe OZ might represent an attractive alternative to Internal Revenue Code Section 1031 like-kind exchanges. Investors that have sold real estate within the past 180 days and that may be under pressure to comply with Section 1031 regulations in order to complete a tax-free exchange, may want to avoid the inconvenience of having to identify a replacement property (and one or more alternative replacement properties, just in case a replacement property falls through) within 45 days of selling the original property, escrowing the sale proceeds with a 1031 qualified intermediary, and closing on a replacement property within 180 days of the sale of the original property. Instead, investors may want to consider investing capital gains from the sale of the original property into a QOF, like Belpointe OZ.

From a tax planning standpoint, I think laddering capital gains tax deferment throughout the year by taking advantage of the rolling 180-day look back period, can be very advantageous come the year-end. Most forms of capital gains qualify for tax deferment—stocks, bonds, mutual funds, ETFs, real estate, the sale of a business, trademarks, patents, cryptocurrencies, precious metals, collectibles, livestock, cars, aircraft, marine craft, etc. In the meantime, the potential growth and income from capital gains reinvested into a QOF can be compounded free of taxation as long as the QOF investment is held for at least 10 years through December 31, 2047. Another key point: there is no limit on how much in realized capital gains one can reinvest into a QOF.

Belpointe OZ is building out a diversified portfolio within what we believe are some of the most attractive growth cities in America. Out of the many opportunity zones that we’ve reviewed (and there are more than 8,700 of them designated by the government), we believe that there are less than 100 that are worth investing in. Click on the link below to review Belpointe OZ’s current properties in the various phases of conception of the project, remodel, ground-up construction and acquisition.

Attention Broker-Dealers: Here’s An Attractive Proposition For You

On May 17th, Belpointe OZ announced the commencement of an offering to raise up to $750 million in capital. This latest offering affords broker-dealers the opportunity to participate in the selling group, and Belpointe OZ has retained Emerson Equity LLC as dealer manager for the offering. Interested broker-dealers may contact Cody Laidlaw at or call 203-883-1944 for further information.

Advisors and investors alike should make note again that Belpointe OZ recently announced its unaudited quarterly NAV as of March 31, 2023, of $351.7 million or $99.82 per Class A unit against a current price of around $85 per unit as of July 21st. This kind of market dislocation is typically self-correcting when the underlying assets are fundamentally sound, and I believe this is the case for Belpointe OZ.

QOFs, like Belpointe OZ, offer investors looking to shelter capital gains a viable opportunity. As part of the program structure, most taxable gains invested in a QOF are not recognized (on the federal level and in many states) until December 31, 2026 (due with the filing of the 2026 return in 2027), or until their investment interest in the QOF is sold or exchanged, whichever occurs first. The potential to compound growth and income thereafter within QOFs expires December 31, 2047.

Further, in its effort to disrupt the U.S. real estate industry, Belpointe OZ is charging among the lowest fees in the market, including:

• No investors servicing fees;
• No disposition fees;
• 0.75% annual management fee; and
• 5% carried interest.

Have questions? You can contact Cody Laidlaw at (203) 883-1944. I can answer as many of your questions as possible and direct you to resources that will provide you with information about the nuts and bolts of QOFs and opportunity zone investing, so you can start planning today.

Cody H. Laidlaw
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944

Disclosure: Cody H. Laidlaw is the Chief Business Development Officer and Head of Investor Relations. Cody is also an investment advisor representative with Seaside Advisory Services, Inc. (d/b/a Seaside Financial & Insurance Services), a SEC registered investment adviser offering advisory accounts and services, and holds a long position in Belpointe PREP, LLC’s Class A units.

The information in this communication is for illustrative, educational and informational purposes only and is subject to change. Nothing in this communication is or should be construed as an offer to sell or the solicitation of an offer to buy any securities. Offers may only be made by means of a prospectus.

Belpointe PREP, LLC (“Belpointe OZ”) has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Prior to making an investment decision, you should read Belpointe OZ’s prospectus and the other documents that it has filed with the SEC in their entirety, and carefully consider its investment objectives and strategy, risk factors, fees and expenses and any tax consequences that may results from an investment in the offering. Copies of these documents can be obtained free of charge from or or from any broker-dealer participating in the offering.

The information in this communication should not be relied upon as investment or tax advice. You should consult with your own investment and tax advisers concerning the federal, state and local income tax consequences of purchasing, owning or disposing of securities in the offering, and of Belpointe OZ’s election to qualify as a partnership and qualified opportunity fund for federal income tax purposes. There is no guarantee that Belpointe OZ will continue to qualify as a partnership or qualified opportunity fund.

Past performance is not an indicator or a guarantee of future performance. An investment in the offering to which this communication relates involves a high degree of risk, including a complete loss of your investment, and may not be suitable for all investors. The price of Belpointe OZ’s securities will fluctuate in market value and may trade above or below net asset value. Brokerage commissions and expenses will reduce returns.

The offering to which this communication relates is being made on a best-efforts basis on behalf of Belpointe OZ through Emerson Equity, LLC, Member FINRA, SIPC, as managing broker-dealer.

©2023 Belpointe PREP, LLC. All rights reserved.

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