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December 29th Deadline

Parking Profits In Tax Shelter Makes Perfect Sense

Investors are coming into the home stretch of 2023 with some late blooming profits in the stock market that probably have stock owners, advisors and tax planners scrambling to determine if capital gains should be realized in 2023 or next year relative to one’s taxable situation. It stands to reason that when the 10-year Treasury Note yield hit 5.0% in mid-October with stocks in technical correction territory, seizing on notable capital gains outside of the Magnificent Seven wasn’t much of a talking point.
Today, the market is seeing widespread profits in stocks that are arguably extended to the upside and could be ripe for harvesting before the market’s closing bell rings at 4:00 pm EST on December 29, the last trading day of the year, to realize capital gains from the sale of stocks, bonds, ETFs, mutual funds and just about every other asset class where December 29 qualifies as the date of sale. The current rally created a whole set of opportunities to lock in profits and defer capital gains for the next several years.
Booking the 2023 capital gains today and sheltering those gains through the timely purchase in units of Belpointe OZ (NYSE American: “OZ”) – the only publicly listed qualified opportunity fund (“QOF”) available to investors trading at a steep discount to Net Asset Value (“NAV”). There are only a couple days left to make the decision as to whether to pay capital gains taxes in 2023, pay capital gains taxes in 2024 or beyond, or shelter capital gains taxes realized in the past 180 days of 2023.
There are several key features to consider when acquiring shares of Belpointe OZ for both investment and tax planning purposes by the closing bell on December 29. The bullish runup in stocks of late puts investors on short notice as to what to do. By purchasing OZ units that closed at $77.19 on Wednesday, December 27, investors can offset capital gains dollar-for-dollar.
The U.S. House of Representatives Ways & Means Committee is currently considering legislation that would enhance opportunity zones and extend the program’s tax incentive deferral date by two years, from December 31, 2026 to 2028. The legislation, called the “Opportunity Zones Transparency, Extension, and Improvement Act” (H.R. 5761), has bipartisan support that incorporates fresh mandates that are purposed to reform and improve the current opportunity zones tax incentive.

Specifically, the new legislation would do the following, among other things:

● Extend the Capital Gains Tax Deferral for Two Years. An eligible investor may defer recognition of capital gains (short-term or long-term) resulting from the sale or exchange of capital assets (or business assets the gain on the sale of which is treated as capital gain) by reinvesting those gains into a QOF within a period of 180 days generally beginning on the date of the sale or exchange (the “Deferred Capital Gains”). Under current opportunity zone rules Deferred Capital Gains are recognized on the earlier of December 31, 2026 or the date on which an inclusion event occurs. December 31, 2026 is also the final date on which an investor can recognize a capital gain eligible for reinvestment into a QOF. The proposed legislation would push this date back by two years, to December 31, 2028.

● Expand Reporting Requirements. QOFs and qualified opportunity zone businesses (“QOZBs”) would be subject to expanded information reporting requirements designed to provide data on job creation and growth, while individual investors would be subject to expanded information reporting requirements designed to allow the Internal Revenue Service to better track both the deferral and recognition of capital gains. In addition, the Treasury would be required to produce certain comprehensive public reports of aggregated information.
● Modification of Qualified Opportunity Zone Tracts. The legislation would provide for the early sunsetting of the small percentage of opportunity zones that have median family income at or above 130% of the national median family income. Additionally, states would have the opportunity to designate new high-need communities to replace any sunset zones.
● Allow for Fund of Funds Structures. Currently, a QOF is not permitted to invest into other QOFs. The proposed legislation would allow a QOF to be organized as a feeder fund, in a “fund of funds” structure, so long as there is only one QOF-to-QOF transaction before fund are invested into a QOZB or qualified opportunity zone property, which would potentially help smaller communities and projects raise funds more easily.

● Establish a State and Community Dynamism Fund. The proposed legislation would establish $1 billion State and Community Dynamism Fund, which would provide flexible grants, operating support and technical assistance to states and territories in an effort to drive capital to projects and businesses in underserved communities.

● Designate Certain Brownfield Tracts as Opportunity Zones. The proposed legislation would allow for zero population, formerly industrial brownfield tracts that are adjacent to current opportunity zones to be designated as opportunity zones.
From an investment standpoint, it is our view that the current price of Belpointe OZ (NYSE American: “OZ”) units at $77.19, as of December 27, 2023, is wholly dislocated from the Net Asset Value as of September 30, 2023 of $370.49 million, or $103.50 per Class A unit. If Belpointe OZ’s projects were simply in the planning stage, then a steep discount is debatable given how the Fed rate hike cycle has so negatively impacted the REIT sector the past 18 months. However, Belpointe OZ has over 2,500 units in its development pipeline throughout four cities, representing an approximate total project cost of over $1.3 billion, one of which is set to open their doors for new tenants as early as spring 2024.
Unlike many private QOFs, investing in Belpointe OZ (NYSE American: “OZ”) is as simple as buying any other publicly traded equity. You can reinvest your realized capital gains going back 180 days for whatever amount is deemed necessary. To properly defer your reinvested capital gains, your accountant will need to file IRS Forms 8949 and 8997 with your tax returns. You will need Belpointe OZ’s EIN which can be found here: Belpointe OZ EIN
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 investor servicing fees;
• No disposition fees;
• 0.75% annual management fee; and
• 5% carried interest.

We are available through this holiday season to accommodate advisors and investors that desire assistance to facilitate transactions to meet the December 31 deadline for sheltering 2023 capital gains realized in the past 180 days.

Wishing you and yours a very happy, healthy and profitable New Year!

Belpointe OZ
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944
E: IR@belpointeoz.com

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 www.sec.gov or investors.belpointeoz.com 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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