Qualified Opportunity Funds (QOFs) are investment vehicles designed to invest in Opportunity Zones, which are economically distressed areas designated by the government. These funds are part of the Opportunity Zone program established by the Tax Cuts and Jobs Act of 2017.
Eligibility to invest in a QOF
- Individuals: Any individual taxpayer, regardless of whether they are accredited or non-accredited, can invest in a QOF. There are no specific income or net worth requirements for individuals to invest in these funds.
- Corporations: Both C corporations and S corporations can invest in QOFs. This includes large publicly traded companies and small businesses structured as corporations.
- Partnerships: Partnerships, including limited liability companies (LLCs) treated as partnerships for tax purposes, can invest in QOFs.
- Trusts and Estates: Trusts and estates can also invest in QOFs, allowing them to defer capital gains tax.
- REITs: Real Estate Investment Trusts (REITs) can invest in QOFs.
Investors in QOFs typically aim to defer, reduce, or eliminate capital gains taxes. To do this, they must reinvest capital gains (from the sale of an asset such as stocks, real estate, or business interests) into a QOF within 180 days of realizing the gain. While anyone can technically invest in a QOF, it’s essential for potential investors to understand the risks involved and consult with tax professionals or financial advisors to ensure the investment aligns with their financial goals and tax planning strategies.