Opportunity Fund Investing

Example #3

$100,000 capital gain invested in opportunity loses value

Read about hypothetical opportunity fund investments just about anywhere, and they’ll all assume a gain on the opportunity fund investment. But investments do actually lose value sometimes! Let’s assume that in this final example.

The investor has a gain of $100,000 from his/her original investment. Within 180 days, the investor invests this $100,000 in an opportunity fund. The funds are held for 7 years, so the investor receives the 15 percent step-up in basis on the original investment before the deferred tax on the gains are due on April 15, 2027. The investor owes $17,000 on this date.

After a 10-year holding period (say, December 31, 2028), the investor sells the opportunity fund share for $50,000, thereby realizing a loss of $50,000. The investor would owe no tax and in fact can use this loss against his income for 2028.

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