Financial advisors shouldn't let the tax incentives of qualified opportunity funds distract them from the complexity and risk of these investments. Here's what you should know.
Accountants warn that the hype around the advantages of these funds may distract advisors from tax-planning risks.
For starters, while you may get a permanent exclusion on 10% of your original gains , you'll eventually have to pay taxes on the remaining 90% of the deferred gain.An 'Available' sign is displayed outside a former Walmart Inc. store in Boulder, Colorado, U.S., on Saturday, Jan. 12, 2019.
Further, in a divorce, if the investor transfers the holding to an ex, then he's recognizing the deferred gain on his tax return. "Depending on what happens with elections this year, it's conceivable you could end up with much higher capital gains rates in three or four years than you do today," said Jeffrey Levine, CPA and CEO of BluePrint Wealth Alliance in Garden City, New York.Aside from the surprise tax consequences, advisors should be mindful of the liquidity risk clients may face.
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