Taxation frustrates many in the cryptocurrency community. Investor capital gains along with Coinbase’s well-documented jockeying with the IRS, taxes continue to be an ongoing concern.
There is some good news however on the U.S. tax front with respect to these cryptocurrency valuations gains.
Embedded in the highly debated $1.5 trillion dollar tax cut signed by President Trump into the law in late 2017 is an esoteric section addressing the tax treatment of real estate and other tax assets. Known as the Investing in Opportunity Act and Opportunity Zone Investment program, it offers savvy investors the opportunity to defer and eliminate future capital gains through Qualified Opportunity Zones and Qualified Opportunity Funds.
So what are Opportunity Zones? In short, they are land parcels in low-income, geographic census tracts that have been designated for investment opportunities and favorable capital gains treatment.
The Qualified Opportunity Funds provide an investment vehicle for these zones. To obtain the maximum tax benefit, investors must hold monies in an Opportunity Zone Fund or property for 10 years
The Cryptotization of Opportunity Zones
Longtime bitcoin advocate Charlie Shrem recently opined on Twitter about the possibilities tied to Bitcoin and Qualified Opportunity Zones.
San Francisco blockchain innovator Jomari Peterson is a strong advocate of this notion. He, in fact, is birthing a new project known as Gama Ventures, a blockchain centric Qualified Opportunity Zone fund seeking to invest in the growth and development of distressed communities.
The goal? To facilitate revenue sharing and micro-equity investments opportunities fueling commercial development, housing, health/wellness initiatives, and free localized WiFi for targeted, economically distressed areas. Asked about the potential benefits to investors, Peterson rattled them off in rapid-fire succession.
Defer capital gains
Reduce capital gains
Eliminate capital gains in future gains
Attracting Cryptocurrency Holders and Investors
He believes that these Opportunity Zone investment opportunities hold particular appeal for high net-worth crypto holders who remain under the edicts of U.S. tax law.
The repatriation of crypto funds from overseas offers a unique investment strategy for those looking to mitigate their tax liability while developing and maintain their long term wealth. They can make a meaningful impact by putting their money to work in a productive way in communities of need.
Through the use of blockchain, Gama Ventures is erecting an ecosystem of smart contracts and automated systems to foster transparency, access, and flexibility for its stakeholders. The goal, says Peterson,
is to coalesce a community of partners around an operational model that fosters multi-stakeholder participation in opportunity fund management.
Policymakers, too, are hopeful that these zones will create a much-needed flow of investment monies toward low-income communities throughout the nation, including in the unincorporated U.S. territory of Puerto Rico where large swaths of opportunity zones currently exist.
Peterson says that his extensive work in aligning economic development and cryptocurrency for the benefit of marginalized communities and populations gives him an uncommon lens for extolling the benefits of Qualified Opportunity Zones.
I am a huge advocate of operating within the regulatory framework, particularly when it involves not only tax advantages to crypto investors, but significant benefits to low-income communities here in the U.S. I see this as a unique win-win scenario.
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