Two Key Provisions Are History At Midnight December 31
First of all, I want to thank the several hundreds of financial industry professionals and potential investors for attending this week’s webinar. The feedback and level of interest in Belpointe PREP, LLC (NYSE American: OZ) are tremendous. It comes when investors are considering year-end gains on all manner of investments sold during the year, future taxes on those gains, and where to reposition the proceeds. Hopefully, the presentation provided the insight, incentive and urgency needed for advisors and investors to make an informed decision.
This column has highlighted several key warning signs that the current year-end correction was more probable than possible these past three weeks. Record insider selling, hotter-than-forecast inflation data, lower sales and earnings guidance from some of the institutional darlings (PayPal, Salesforce.com, Adobe, Disney, Nucor, DocuSign, etc.), a Fed policy that, in my view, pivoted from patient to panic and the fomenting of fears surrounding the Omicron variant that triggered more selling of stocks around the world.
Adding to the stock market’s frustration is the fate of the $2 trillion Biden spending plan that’s now on ice and a sudden shift in market sentiment. Goldman Sachs was quick to lower their GDP forecast Monday morning. “With headline CPI reaching as high as 7% in the next few months in our forecast before it begins to fall, the inflation concerns that Sen. Manchin and others have already expressed are likely to persist, making passage more difficult,” the firm also noted. (Source: https://www.cnbc.com/2021/12/20/goldman-cuts-gdp-forecast-after-sen-manchin-says-he-wont-support-bidens-build-back-better-plan-.html)
To put it lightly, there are many unknown and fluid factors at work as fund managers and individual investors struggle to get a fix on interest rates, Fed tapering and tightening forward earnings growth for the S&P, and most of all, stock valuations that are at decade highs versus their historical P/E ratios right as the Fed is pulling the punch bowl. There should be no surprise that astute money is pairing gains against losses. Simply speaking, the game has changed.
If the market now has to fight the Fed where stock multiples are contracting, it stands to reason that investors may consider options on capital gains that may be realized if the Santa Claus rally materializes.
A lot of technical damage has occurred since Thanksgiving and the market may right itself, but may not likely trade decisively higher until the December inflation data crosses the tape and the next FOMC meeting on January 25-26, where investors know what Fed policy will look like. Until then, taking full advantage of Opportunity Zone Fund benefits might prove to be a very savvy year-end strategy.
Of what makes up, in my opinion, the stellar list of bullish attributes that characterize Belpointe PREP (NYSE American: OZ), there are two items that I believe deserve the full attention of interested parties. December 31, 2021, represents a hard deadline to qualify for a 10% step-up in basis and to receive a full five years of tax deferral. Let’s look at both benefits in more detail.
The first is the five-year deferral of taxes on capital gains realized in 2021. When Qualified Opportunity Zone Funds (QOFs) first went live in 2019, the set date to defer capital gains taxes was December 31, 2026, and investors had seven years to defer taxes. December 31, 2026, is not a moving goal post. It’s when the government expects to get paid. With that understanding, investors that reinvest their capital gains by December 31, 2021, and hold until 2026, will receive a full 5-year deferral.
The second benefit that expires on December 31, 2021, is the 10% step-up basis for capital gains invested in QOFs. For example, a $100,000 investment made by year-end and held until December 31, 2026, will carry a go-forward cost basis of $110,000, thereby reducing the amount of capital gains tax due when the position is sold or when taxes are due at the end of 2026. This 10% step-up basis feature declines to 0% on January 1, 2022.
History is not on the side of fighting the Fed in a fully invested stock portfolio but, in my opinion, is well on the side of owning income-producing real estate that can be indexed to inflation. I believe that at no other time in the past several years has the repositioning of assets looked so timely given the inflation data, a more hawkish Fed fiscal policy, low multi-family residence inventories and the demand for high-quality rental units by a labor force that is enjoying strong wage gains in hot job markets.
I believe these benefits are suited well for investors sitting on capital gains from the sale of stocks, bonds, real estate, a business, collectibles, cryptocurrencies, trademarks, patents, precious metals, planes, boats, livestock, or any other intangible or tangible assets. In my view, reinvesting those realized capital gains by December 31st into a Qualified Opportunity Zone Fund is a compelling growth and income proposition that shelters 100% of those capital gains for the next five years and establishes a 10% step-up in basis in the process. But investors have to act now to qualify for all of the benefits.
Have questions about how Belpointe OZ can provide opportunities for investment appreciation, income and help you or your clients to Defer, Reduce or Eliminate Capital Gains Obligations?
Call or email us and we’ll take the time to answer all of your questions about Belpointe OZ and how reinvesting capital gains in a Qualified Opportunity Zone fund can be utilized to offset an investor’s tax obligation.
You can contact us at 203-883-1944 or IR@belpointeoz.com
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944
Disclosure: Cody H. Laidlaw is the Chief Investor Relations Officer of Belpointe PREP, LLC. 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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