Client Background
The clients were owners of a successful, family-run construction business they had built and operated for more than 20 years. When they decided to sell, they received a mid–seven-figure offer, resulting in an estimated capital gain of approximately $3 million. Their primary goals were to reduce the immediate tax impact of the sale while repositioning a portion of the proceeds into long-term, income-producing investments.
The Challenge
Given the size of the gain and their long-term investment horizon, a traditional reinvestment approach alone would not have meaningfully addressed their tax exposure. The clients needed a strategy that provided tax deferral today while creating durable income and tax efficiency over time.
The Strategy
We implemented a multi-strategy tax planning approach that included an allocation to Opportunity Zone investments. The clients invested $1 million across three Opportunity Zone funds, allowing them to defer capital gains taxes on that portion of the business sale while redeploying capital into institutional real estate projects.
The Outcome
Approximately 30 months later, the underlying Opportunity Zone properties were constructed, leased, and fully stabilized. At that point, the portfolio began generating a blended annual distribution of approximately 7%. By maintaining a long-term hold of 10 years or more, the clients are positioned to eliminate capital gains taxes on the Opportunity Zone investments and potentially eliminate the deferred capital gains from the original business sale attributable to that investment.
The Result
The strategy allowed the clients to meaningfully reduce near-term tax liability, generate passive income, and align their wealth with a long-term, tax-efficient investment plan.
Key Takeaway
Opportunity Zone investments can be an effective tool for deferring and potentially eliminating capital gains taxes from a business sale while creating long-term, income-producing assets.