How can I exclude taxes on the initial investment, or would I have to pay up those taxes when the opportunity fund is sold?
The "principal taxes" that were deferred upon entry into the QOF are due no matter what. They can be offset by losses in the year of recognition, though. Therefore, you could plan ahead using carry-forwards, loss harvesting, accelerated depreciation, and other techniques. But the deferred gain is recognized upon the earlier of the disposition of the QOF interest or December 31, 2026, whichever is sooner. Those taxes would really be paid in early 2027.
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