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Are distributions in a OZ project tax-exempt?

During the years that capital gains are tax-deferred, are distributions from the project in the Opportunity Zone tax-exempt?


Answers
  • Brad Cohen
    October 10, 2020

    To the extent of basis, they are exempt. It is a little tricky to determine the basis.

  • Matt Campbell
    October 09, 2020

    Generally no, but distributions that do not exceed the basis the investor has may be treated as a return of capital. Since a capital gain investor has zero basis on an OZ investment, there would have to be a basis from qualifying debt to have a tax-free return of capital. Funds for such a distribution might come from a cash-out refinance after a development stabilizes.

  • Matthew Rappaport
    October 09, 2020

    No, they are taxed as normal.

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