Investors Booking Profits During Market Meltdown Consider Capital Gains Tax-Sheltered Property
Another week of more of the same for stock investors. The prolonged war in Ukraine, widespread lockdowns in China, crude prices back up over $100/bbl, food commodity prices moving up and to the right and the Fed meeting in a panic room to address runaway inflation that they were in denial about for all of 2021.
The possible fallout from these perfect storm conditions is a market on the tips of the March lows and vulnerable to another leg down. Against this backdrop, investors may be looking at locking in long-term capital gains from the decade-long bull market and shifting portfolio weightings into positions that may provide stagflation resistance, one of which may be multi-family residential real estate.
Further to this point, I believe that Belpointe PREP, LLC (NYSE American: “OZ”) is positioned in the sweet spot of the broader real estate investment space—multi-family residential real estate—namely Class A apartment communities located in qualified opportunity zones within markets enjoying strong labor and migration trends.
Belpointe PREP is building and acquiring multi-family residential Class A luxury apartment dwellings within qualified opportunity zones in cities like Nashville, TN, and Sarasota/St. Petersburg, FL. In addition, Belpointe’s executive management team is actively seeking to acquire other Qualified Opportunity Zone Funds (QOFs) or assets within other funds that are being considered for sale. We believe there are clear benefits to acquiring seasoned properties in lieu of undertaking new construction, and any and all referrals and inquiries can be directed to me.
For those just investigating qualified opportunity zone investing for the first time, Belpointe PREP (NYSE American: “OZ”) is the only publicly listed QOF and it requires no paperwork or documentation to invest, providing investors the ability to pair off 2021 year-end gains (as well as 2022 gains) and the opportunity for growth and income for the next five years, out to December 31, 2026, where all of the capital appreciation and the majority of pass-through income may be tax-free.
But there is more good news in the works: the two co-authors of the legislation that created qualified opportunity zones—Senator Cory Booker (D-NJ) and Senator Tim Scott (R-SC)—are looking to make investing into QOFs even more attractive for new investors. As of early April, they, their co-sponsors, and a number of co-sponsors in the House, introduced a bill called the Opportunity Zones Transparency, Extension, and Improvement Act (the “OZ Improvement Act”), which is designed to enhance the spirit of the original legislation and the benefits for investors seeking to invest in QOFs. The bill has strong bipartisan support and, I believe, should easily pass into law.
• QOF Reporting – The OZ Improvement Act would expand the reporting requirements of QOFs requiring them to provide the IRS with information about, among other things, the census tracks where their opportunity zone (OZ) investments are located, the amount of an OZ investment, and certain information designed to assess job creation and growth by OZ investments.
OZ Program Extensions
• Extension of Investment Period – The OZ Improvement Act would extend the capital gains investment deferral period through December 31, 2028.
• Basis Step-Up – When the Tax Cut and Jobs Act of 2017 first established opportunity zones, investors had two chances to receive a step-up in basis (i.e., a reduction in their deferred capital gains): the first required holding their OZ investment for a period of five years, up to December 31, 2026, to receive a step-up in basis equal to 10% of their deferred capital gains, and the second required holding their OZ investment for two additional years (seven years in total), up to December 31, 2026, to receive a second step-up in basis equal to 5% of their deferred capital gains (for a total step-up in basis of 15% of their deferred capital gains).
The OZ Improvement Act would lower the holding period for those investors eligible to receive the second step-up in basis (the additional 5%) from two additional years to one additional year (six years in total). In addition, if enacted as currently drafted, by virtue of extending the deferral period through December 31, 2028, investments made through December 31, 2022 and held for six years, up to December 31, 2028, would become eligible to receive each of the two steps-up in basis described above.
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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