Fund structure and diligence checklist unique to opportunity zone investments
In addition to normal real estate diligence procedures, there are specific opportunity zones (OZ) items you should consider before making an OZ investment. Use the “Fund structure and diligence tips unique to OZ investments” checklist as a guide to ask the right questions, including:
- Are there conditions to releasing funds from escrow? Will conditions to breaking escrow be met before your 180-day “gain window” expires?
- What is the period of time that capital can be called? Are you at risk of funding a capital call with ineligible gains after your 180-day clock expires?
- Does the OZ investment forecast making sufficient distributions to pay the deferred capital gain tax in 2026? Or will you need to plan to pay the tax from other resources? Are there safeguards in place to ensure distributions will not jeopardize your OZ tax benefits?
- Under what conditions (or level of vote) could the asset be sold before completing the 10-year hold?
- And more
Please consult with a tax professional before investing in a non-real estate OZ fund. The rules are more complex and go beyond the scope of this document.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.
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