An investment In A QOF Is Not Necessarily a 100 Percent Investment In QOZs
The rules that govern qualifying as a QOF do not require 100 percent investment in QOZs. The rules are somewhat complex, but, in effect, they do allow a QOF to invest significant amounts outside of QOZs. This is important from the perspective of offering some level of diversification and even allowing for potential return-enhancement. In this context, it will be important to understand the strategy and portfolio composition of any QOF. Much as not all QOZs are the same, not all QOFs are the same either.
Qualified Opportunity Funds are an intriguing tax-deferral and reduction opportunity to invest in Qualified Opportunity Zones. The applicable provisions, however, are relatively new, and it is important to proceed with care and caution as investors seek to capitalize on them.
Michael J. Nathanson is chairman and CEO; Max Haspel is principal, managing director and senior wealth advisor; and Ron Rubin is president, vice chairman and chief culture officer of The Colony Group.