Opportunity Zone Investing Made Easy

As investors head into the final weeks of 2022, it can be a real challenge to find methods by which to reduce the sting of capital gains taxes realized during the course of the year. Capital gains come in multiple forms and yet the ability to shelter taxes on those gains in simple terms tends to be limited. Fortunately, there is at least one strategy that offers investors the ability to not only defer paying taxes on realized capital gains, but also the potential for tax-free growth and tax-free income.

Belpointe PREP, LLC (NYSE: American “OZ”)—the only publicly traded Qualified Opportunity Zone Fund (“QOF”) that you can invest in with no upfront documentation or special arrangements.

If you wish to learn more, call me before the end of next week and I’ll take the time to answer your questions about Belpointe PREP (“Belpointe OZ”) and how reinvesting capital gains into a QOF can be utilized to offset capital gains tax obligations. My direct phone number is (203) 883-1944.

Here’s where some year-end fodder for thought that just might add value for investment advisers and individual investors alike. The United States has more than 8,700 designated Opportunity Zones for investors to consider. That, in itself, is a daunting number of choices. What sets Belpointe OZ apart from other qualified opportunity funds (“QOFs”) is that it is the first and only publicly traded QOF, where transparency is higher than in many privately managed QOF structures.

I think a key benefit of Belpointe OZ from a tax planning perspective is that, while other QOFs have limited or restrictive redemption features, Belpointe OZ Class A unitholders can buy and sell Class A units in the open market to adjust their tax deferral strategy. For 2022, investors who have realized capital gains in the past six months, whether from the sale of stocks, real estate, a business, collectibles, planes, boats, livestock, cryptocurrencies, precious metals, an interest in a partnership, or any other variety of assets, may want to consider reinvesting those capital gains into a QOF, such as Belpointe OZ.

Another key benefit in my mind is that when purchasing Belpointe OZ’s Class A units in the market, there are no minimum investment amounts; investors can purchase as little as one Class A unit. Thus, giving investors the ability to pair off, dollar-for-dollar, realized capital gains against a liquid tax shelter, where no taxes are due from capital gains realized in 2022 and reinvested into a QOF within the 180-day look-back period (as long as you continue to hold the investment) until December 31, 2026.

This four-plus-year tax deferment might serve as an alternative strategy for 2022 year-end tax planning purposes. For example, if we apply the 180-day look-back period, capital gains realized as far back as the first week of June of this year qualify for 2022 tax deferment. But that 2022 deferment window narrows with each passing day. It is important to act quickly as the 2022 clock for deferring capital gains taxes is ticking.

In yet other news, the potential passage of the proposed Opportunity Zones Transparency, Extension, and Improvement Act (the “OZ Extension and Improvement Act”) may revive some now expired favorable terms of QOF investing, that is if Congress can pass the bill by year-end. I’m cautiously optimistic following the midterm elections, as bipartisan support for the OZ Extension and Improvement Act appears to be getting some upbeat chatter.

If passed in its current form, the OZ Extension and Improvement Act would re-establish the 10% step-up in basis for QOF investments that are held for at least 5 years prior to the end of the deferral period (as proposed, December 31, 2028), and also reduce the holding period requirement for investors to receive the additional 5% step-up in basis (for a total step-up in basis of 15%) from the current 7 years to 6 years (through the proposed December 31, 2028 deferral period).

If not passed into law by year-end, in my opinion, the OZ Extension and Improvement Act will be reintroduced largely in the same form in 2023, where its passage would work just as well—at least for investors, where the primary benefit, in my view, is the proposed re-establishment of the combined 15% step-up in basis. For all practical purposes, in my opinion, Congress should move now on this important piece of legislation for capturing a renewed step-up basis and providing a major incentive to invest in and drive capital to QOFs from capital gains realized in 2022. Plus, I think it would demonstrate that Congress can indeed find common ground on “greater good” legislation.

As the only QOF traded on a national securities exchange and as a public real estate partnership structure, I think you’ll agree that Belpointe OZ can offer some key advantages over other types of traditional real estate investments, such as:

• providing for pass-through income, thereby avoiding entity-level, double-taxation for investors;
• providing for pass-through depreciation, with no depreciation recapture if an investment is held for 10 years up to December 31, 2047;
• providing low investment minimums;
• requiring annual distributions of at least 90% of taxable income;
• providing for up to a 20% reduction on taxable distributions via Internal Revenue Code Section 199A; and
• providing investors with greater control over their exit timing and amount.

In addition to the above stated benefits, I think a public real estate partnership structure is further enhanced by:

• offering active management by experienced professionals;
• providing for the ability to acquire stabilized assets through mergers with other QOFs;
• providing for asset diversification, because a public real estate partnership structure can hold multiple opportunity zone investments; and
• eliminating future capital call requirements.

Belpointe PREP, LLC (NYSE: American “OZ”) is a QOF that is building and acquiring multi-family residential properties that fall into the Class-A, full-featured category, and addressing markets that research shows are experiencing growth both in terms of migration trends and employment opportunities. Belpointe OZ is already committed to several investments in Nashville, Tennessee, and the state of Florida.

This last item of note on my list above—one of the most significant features of Belpointe OZ in my opinion—is that Class A unitholders are not at risk of receiving and being held liable for any future capital calls. Capital calls are a feature many investors may regularly face in acquiring, developing and renovating private opportunity zone properties. Liquidity, no risk of capital calls and asset diversification put Belpointe OZ in the class of best qualified opportunity zone funds, in my view.

Investing capital gains into a QOF, like Belpointe OZ, allows an investor to defer the tax payment on those capital gains through the earlier of tax year-end December 31, 2026, or the date on which the investor sells their investment or experiences another type of inclusion event. Plus, all income and appreciation from the time one invests capital gains into a QOF through December 31, 2047, is potentially tax-free. We spell out how this alternative can work for you in our updated white paper.

Have questions about how Belpointe PREP, LLC (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
Editor-in-Chief
Belpointe OZ
255 Glenville Road
Greenwich, CT 06831
T: (203) 883-1944
E: IR@belpointeoz.com

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 claidlaw@belpointe.com. Read the prospectus in its entirety before making an investment decision.

This communication, including any links embedded herein, may not be distributed in any jurisdiction where it is unlawful to do so. Nothing in this communication is or should be construed as an offer to sell or solicitation of an offer to buy Belpointe PREP’s Class A units in any jurisdiction where it is unlawful to do so.

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.

This communication may contain estimates, projections and other forward-looking statements, typically identified by words and phrases such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” or the negative of such words and other comparable terminology. However, the absence of these words does not mean that a statement is not forward-looking. Any forward-looking statements expressing an expectation or belief as to future events is expressed in good faith and believed to be reasonable at the time such forward-looking statement is made. However, these statements are not guarantees of future events and involve risks, uncertainties and other factors beyond Belpointe PREP’s control. Therefore, we caution you against relying on any of these forward-looking statements. Actual outcomes and results may differ materially from what is expressed in any forward-looking statement. Except as required by applicable law, including federal securities laws, Belpointe PREP does not intend to update any of the forward-looking statements to conform them to actual results or revised expectations.

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