How does the 10-year rule work under OZ 2.0?

For investments held at least ten years, an investor may elect to treat the investment’s basis as its fair market value when it is sold, subject to a limit of 30 years from the investment date (26 U.S.C. § 1400Z-2(c), as amended by Pub. L. 119-21).

When is deferred gain recognized under OZ 2.0?

For amounts invested after December 31, 2026, deferred gain is included in income at the earlier of a sale of the investment or five years after it was made, after a 10% basis increase (30% in a qualified rural opportunity fund) (26 U.S.C. § 1400Z-2(b)).

Can refinancings or distributions affect OZ benefits?

They can. Certain transactions during the hold, including some distributions and transfers of a fund interest, are inclusion events that can accelerate deferred gain under the regulations (26 C.F.R. § 1.1400Z2(b)-1). Each should be reviewed with your tax advisors before it happens.

OZ Exit Planning & 10-Year Lifecycle Management

Why it matters

The exit is decided long before it happens

Refinancings, distributions, partial sales and ownership changes during the hold can all affect investors’ outcomes. Each one needs to be considered in the context of the full lifecycle.

A clean exit depends on a complete compliance history. Gaps discovered at the end are the hardest to fill.

What we do

Scope of work

Every engagement is scoped to the project. These are the areas we typically cover.

Lifecycle milestone tracking
Monitoring the holding-period dates that matter to investors, from first investment through the end of the hold.
Transaction review
Flagging the compliance considerations in refinancings, distributions and partial dispositions for your advisors.
Exit readiness
Assembling the complete compliance history and documentation buyers, investors and advisors will ask for.
Wind-down coordination
Supporting the orderly close of the fund and business structure with your legal and tax team.

Alongside your advisors

Working with counsel, not in place of it

The tax treatment of an exit is a question for your tax advisors. We make sure they have a complete, well-documented record to work from.

Questions

Common questions

How does the 10-year rule work under OZ 2.0?: For investments held at least ten years, an investor may elect to treat the investment’s basis as its fair market value when it is sold, subject to a limit of 30 years from the investment date (26 U.S.C. § 1400Z-2(c), as amended by Pub. L. 119-21).
When is deferred gain recognized under OZ 2.0?: For amounts invested after December 31, 2026, deferred gain is included in income at the earlier of a sale of the investment or five years after it was made, after a 10% basis increase (30% in a qualified rural opportunity fund) (26 U.S.C. § 1400Z-2(b)).
Can refinancings or distributions affect OZ benefits?: They can. Certain transactions during the hold, including some distributions and transfers of a fund interest, are inclusion events that can accelerate deferred gain under the regulations (26 C.F.R. § 1.1400Z2(b)-1). Each should be reviewed with your tax advisors before it happens.

General information, not legal or tax advice.

Talk to us before the structure is set.

Whether you’re forming a new fund or bringing an existing project into compliance, we’ll tell you plainly where you stand.

Speak with our team Take the readiness check

Lifecycle milestone tracking

Transaction review

Exit readiness

Wind-down coordination

Talk to us before the structure is set.