8 OPPORTUNITY ZONE MAGAZINE | ISSUE 2 • VOLUME 2
THE ROLE OF A QUALIFIED OPPORTUNITY FUND IN YOUR CAPITAL STACK FOR DEVELOPERS AND BUSINESS OWNERS
By Elizabeth Humphreys
A QOF can be valuable if its structural elements are set up correctly and its risk and limitations are agreed by the parties .
The benefits of what Qualified Opportunity Zones offer to investors are clear -- deferral of their gain until 2026 with a partial elimination of gain if the investment is held for a certain period plus a total exclusion of gains on the appreciation in their QOF investment if that investment is sold after 10 years . Often overlooked , however , are the benefits developers and business owners can experience by developing a project or growing a business in a QOZ .
WAYS THAT DEVELOPERS CAN BENEFIT
There are two primary ways that developers and business owners ( hereafter referred to as sponsors ) can benefit from having a project or business in a QOZ . The first is to roll their own gains over into the project . To do this the sponsor would have to not already own the land , due to the QOZ related party rule , and they would need to set up a QOF to put their gains into prior to closing on the property . The second way is
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