A Historic Opportunity
Saxum seeks to provide superior risk-adjusted returns to investors through its tax-advantaged Saxum Opportunity Zone Fund, which focuses on value-add and opportunistic projects throughout the Northeast and Mid-Atlantic regions. Saxum is uniquely positioned to leverage this historic tax-incentive opportunity given that it is one of the few vertically-integrated investment and development companies already executing on middle-market, urban-centric deals in these markets. Saxum is considered a thought-leader for the program and was one of the first funds to announce nationally, recognizing that not all Opportunity Zones are created equal and that a distinct first mover advantage exists.
The Opportunity Zone Program received overwhelming bi-partisan support and was established by Congress in the Tax Cuts and Jobs Act of 2017 as an innovative approach to spurring long-term private sector investments in designated census tracts in need of capital investment. The two principle objectives of the program were to unlock and leverage the estimated $6 trillion in unrealized capital gains held by U.S. investors and to redeploy those proceeds into designated tracts labeled as Opportunity Zones through a tax-efficient mechanism.
Investors may defer capital gains taxes up to 7 years on the sale of any existing asset which includes stocks, bonds, real estate, operating businesses, art, etc. Deferred taxes may also be reduced over time by 10% to 15% if redeployed by 12/31/2021 or 12/31/2019 into an Opportunity Zone Fund. Capital gains taxes due from new investments made in the Opportunity Zone Fund would be eliminated if held for 10 years.
|Deferral of Original Investment Capital Gains to the Earlier of the Fund Sale or 12/31/2026||Reduction of Original Investment Capital Gains Taxes||Tax Treatment of Opportunity Fund Capital Gains|
|Traditional Investment||Opportunity Zone Investment|
|Less: Capital Gain Tax (23.8%)||(238,000)||-|
|After-Tax Investment Basis||$762,000||$1,000,000|
|Year 10 Value (assumes 7% annual Investment appreciation)||$1,498,969||$1,967,151|
|Less: Deferred Taxes on Invested
Gains Due 12.31.26
|Less: Year 10 Capital Gains (23.8%)||(175,399)||-|
|After Tax Return||$1,323,571||$1,764,851|
|OZ Investment Outperformance: 44.1%|
Opportunity Zones: A Historic Tax-Efficient Mechanism to Leverage Real Estate
September, 2018 - It is our belief that we have just witnessed the passing of one of the most innovative and impactful bi-partisan sponsored tax legislations in recent history. While the impact will be wide reaching, it is difficult to fully appreciate the potential benefits that will be directly attributed to the Opportunity Zone Program, including economic growth, job creation, social impact, financial profit and increased future municipal tax revenues. Surprisingly the program remains relatively unknown to both retail and institutional investors despite the impressive opportunity surrounding the recent legislation.