There’s Still Time to Shelter Gains for Tax-Free Growth
Although 2022 was a very challenging year for investment returns, some stocks performed better than others. For example, there were multiple big winners in the energy sector. When the sanctions on Russian crude and refined products exports went into effect, energy prices surged higher, spurring growth in the energy sector. These leading stocks in the sector noted below are just a handful of the big-cap, mid-cap, and small-cap energy stocks that posted huge returns last year.
Source: CNBC Make It (Accessed March 13, 2023)
With the rising volatility in equities markets and it being widely anticipated that the Federal Reserve would be taking aggressive measures to fight inflation, smart advisors and individual investors alike are likely to have booked capital gains when the market for equities turned bearish, rather than attempting to fight the Fed, and may now be sitting on the sidelines waiting the current market out.
Equity investors appeared optimistic in January, as the narrative around disinflation lead stocks higher. The buoyant mood subdued in February, however, with the Federal Reserve moving rates higher, faster, and for longer than had been anticipated. So, rather than plow those precious 2022 capital gains back into a stock market that may still face some stiff headwinds, investors and advisors may instead want to opt for sheltering those gains going out to December 31, 2026.
For those investors sitting on the fence with realized gains in 2022, there is still time to offset those gains by purchasing Class A units in Belpointe OZ (NYSE American: “OZ”) and taking advantage of the 180-day look-back window that allows capital gains realized from mid-September through December 31, 2022, to be offset and not recognized until December 31, 2026. In the meantime, the potential growth and income from those invested capital gains can be compounding free of taxation as long as the investor holds their interest in Belpointe OZ for at least 10 years, through December 31, 2047.
By way of example, if an investor or advisor sold their energy stocks into the September through December rally that saw the S&P 500 Energy Sector SPDR® ETF (XLE) gain 59% on the year, then investing those gains into an Qualified Opportunity Zone Fund such as Belpointe OZ (NYSE American: “OZ”) might make for a very attractive alternative proposition. Belpointe OZ is the only publicly traded Qualified Opportunity Fund (QOF), and investing in Belpointe OZ does not require a subscription agreement.
Source: Barchart.com S&P 500 Energy Sector SPDR® (XLE)
For 2023, Belpointe OZ will continue to seek to acquire stabilized assets in those cities where we believe population growth and diversified job growth are experiencing uptrends. 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 in which it is worth to invest. Our development team is comprised of executives with combined decades of experience in bringing projects online in the Class-A multi-family apartment sector. We believe in our acquisition strategy for the following reasons:
Stabilized Asset Acquisition Strategy: Belpointe OZ is the only publicly traded QOF, which allows it to acquire other QOFs and their opportunity zone assets without triggering an inclusion event. This, in turn, allows Belpointe OZ to preserve the Opportunity Zone tax benefits for the acquisition target’s investors and ultimately provide OZ’s unitholders with newly built qualified and stabilized opportunity zone assets that are focused on generating positive cash flow with minimal construction risk.
Win #1: Sponsors of the acquired Opportunity Zone Funds. Typically, a development project takes approximately 2 years to complete. Afterwards, Qualified Opportunity Funds and their sponsors are required to hold completed assets for an additional 8 years to meet the minimum 10-year holding period required to receive the full Opportunity Zone tax benefits. Conversely, Belpointe OZ’s unique ability to acquire other Qualified Opportunity Funds without triggering an inclusion event for the acquisition target’s investors provides sponsors with the flexibility to exit their investment vehicles up to 8 years earlier than previously planned. This provides sponsors the option to receive their carried interest profits up to 8 years faster than expected.
Win #2: Investors of the acquired Opportunity Zone Funds. Investors benefit from the ability of Belpointe OZ to acquire their Qualified Opportunity Funds because they may be able to recognize gains from their investments without losing any of their Opportunity Zones tax benefits. Additionally, there are a number of other benefits that Belpointe OZ provides for its unitholders, such as: greater diversification, liquidity, lower fees, unitholders’ investment exit control, and up to 20% tax deduction benefit on income that exceeds depreciation (via Internal Revenue Code Section 199A).
Win #3: Existing OZ Unitholders. Belpointe OZ’s existing unitholders also benefit when Belpointe OZ acquires other Qualified Opportunity Funds, as such acquisitions may increase Belpointe OZ’s cash flow from operations and possibly decrease risk by improving investment diversification and eliminating construction and development risks.
In sum, I see this year as one of preparing properties for lease up in 2024, such as our Class-A full-featured multi-family project in Sarasota, and seeking to acquire stabilized assets to deliver potential future capital appreciation and a stream of dividend income.
Want more information? There’s a wealth of detail on our website at investors.belpointeoz.com where investors and advisors alike can learn about Belpointe OZ and some of its key features.
Have questions about how Belpointe OZ (NYSE American: “OZ”) can provide opportunities for investment appreciation and income and help you or your clients to defer or eliminate capital gains tax obligations?
Call me, Cody Laidlaw, at (203) 883-1944. I can answer your questions 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 Investor Relations Officer. 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.
Important Information and Qualifications
Belpointe PREP, LLC (“Belpointe PREP”) has filed a registration statement (including a prospectus) with the U.S. Securities and Exchange Commission (SEC) for the offer and sale of up to $750,000,000 of Class A units representing limited liability interests in Belpointe PREP. You should read Belpointe PREP’s most recent prospectus and the other documents that it has filed with the SEC for more complete information about Belpointe PREP and the offering
Investing in Belpointe PREP’s Class A units involves a high degree of risk, including a complete loss of investment. Prior to making an investment decision, you should carefully consider Belpointe PREP’s investment objectives and strategy, risk factors, fees and expenses and any tax consequences that may results from an investment in Belpointe PREP’s Class A units. To view Belpointe PREP’s most recent prospectus containing this and other important information visit sec.gov or belpointeoz.com. Alternatively, you may request Belpointe PREP send you the prospectus by calling (203) 883-1944 or emailing email@example.com. Read the prospectus in its entirety before making an investment decision.
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Neither Belpointe PREP nor any of its affiliates provide investment or tax advice and do not represent in any manner that the outcomes described herein will result in any particular tax consequence. Prospective investors should consult their own investment and tax advisers concerning the U.S. federal, state and local income tax consequences, as well as any tax consequences under the laws of any other taxing jurisdiction, in relation to their personal tax circumstances, which may vary for prospective investors in different tax situations.
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