Qualified Opportunity Zone Investment

Tax-Advantaged Capital Deployment | IRC §1400Z-2 Structure

Gallery Haus is structured to accept capital gain reinvestment through a Qualified Opportunity Fund (QOF), offering eligible investors the ability to defer capital gains tax and exclude post-investment appreciation after a 10-year hold period.

Illustrative Investor Scenario

$50M
Current Asset Value
$25M
Unrealized Gain
$5.95M
Federal Tax @ 23.8%

Current Position: Investor holds appreciated stock or other capital asset with $25M cost basis, current FMV $50M (unrealized $25M gain)

Objective: Defer capital gains tax and reinvest proceeds into QOZ-eligible real estate development through IRC §1400Z-2 structure

Eligibility: U.S. taxpayer realizing eligible capital gain before 12/31/2026 (foreign investors generally not eligible for QOZ tax benefits)

Step-by-Step Timeline

1
Triggering Event (Illustrative): Liquidate appreciated asset → realize $25M capital gain
2
180-Day Window: Must deploy capital into QOF within 180 days of gain recognition
3
Investment: Subscribe to Gallery Haus QOF within 180-day window (gain proceeds only)
4
Tax Filing: File Form 8949 + Form 8997 with applicable tax return to elect deferral
5
Deferred Tax Payment: Pay tax on deferred gain by earlier of disposition or 12/31/2026
6
Hold Period Requirement: Maintain QOF investment for ≥ 10 years to qualify for basis step-up
7
Exit (Post-10 Year Hold): Elect IRC §1400Z-2(c) FMV basis step-up → exclude all post-investment appreciation

Example Economics (Illustrative)

Item No QOZ With QOZ
Tax due now (on $25M gain) $5.95M today $5.95M in 2027 (2026 tax year)
Post-investment appreciation (10 yrs) Taxable (23.8%) Tax-free via 10-year step-up
Time value of deferral (≈ 16 mo) None ≈ $300–400k benefit (4–5% yield)

Investor Benefits

Tax Deferral

Defer capital gains tax payment until earlier of disposition or 12/31/2026 (2026 tax year)

Tax-Free Appreciation

Elect FMV basis step-up on exit after 10-year hold period → exclusion of all post-investment appreciation

Institutional Compliance

BSC handles all QOF compliance testing, annual reporting (Form 8996), and investor K-1 preparation

Experienced Sponsors

Joint venture between BSC and LD&D on shovel-ready, QOZ-designated multifamily development in St. Petersburg

Compliance & Administration

BSC handles all QOF compliance and reporting obligations, including:

Key Forms, Dates & Parties

IRS Forms
  • Form 8949: Report deferral election for deferred capital gain
  • Form 8997: Initial and annual QOZ investment reporting (investor-level)
  • Form 8996: Annual QOF certification (entity-level)
Critical Deadlines
  • Investment Window: 180 days from date of capital gain recognition
  • Deferred Tax Payment: Earlier of disposition or 12/31/2026
  • 10-Year Hold Election: Elect basis step-up upon exit after 10-year hold period
  • QOZ Program Sunset: Investments must occur before 12/31/2026
Key Parties
  • Investor: U.S. taxpayer with eligible capital gain realized before 12/31/2026
  • Investor Counsel / CPA: Verify gain eligibility, prepare Forms 8949 and 8997
  • BSC / LD&D: Operate QOF and QOZB entities; manage compliance tests and reporting
  • QOF Administrator: Track investor basis, distributions, and mixed-fund allocations
Investor Eligibility
  • Must be U.S. taxpayer (individuals, estates, trusts, corporations, partnerships)
  • Foreign investors generally not eligible for QOZ tax benefits
  • Gain must be eligible capital gain (not ordinary income)

Gallery Haus Project Summary

Project: Gallery Haus — 254-unit Class A multifamily development

Location: St. Petersburg Qualified Opportunity Zone (federally designated)

Sponsors: Black Salmon Capital Holdings, LLC ("BSC") and LD&D RE, LLC ("LD&D")

Status: Shovel-ready, ground-up development

Asset Type: QOZ Business (QOZB) holding qualified opportunity zone business property

Development Plan: 31-month working capital safe harbor compliant

Total Development Cost: ~$122M

Target Delivery: Q4 2027

Important Disclaimers

Not Tax or Legal Advice: This summary is provided for informational purposes only and does not constitute tax, legal, or investment advice. Qualified Opportunity Zone investments involve complex tax rules under IRC §1400Z-2 and related Treasury Regulations. Each investor's tax situation is unique, and QOZ benefits depend on individual circumstances, holding periods, and compliance with numerous technical requirements.

Consult Professional Advisors: Prospective investors must consult with their own tax counsel and certified public accountants before making any QOZ investment decision. BSC and LD&D do not provide tax or legal advice to investors.

Illustrative Example Only: The $25M capital gain scenario is hypothetical and provided solely for illustration. Actual investor outcomes will vary based on specific facts, tax rates, holding periods, and future legislative or regulatory changes.

No Guarantee of Tax Benefits: While the QOZ program offers substantial tax incentives, BSC and LD&D make no representation or warranty regarding the availability, timing, or amount of any tax benefits. Changes in tax law, IRS guidance, or investor circumstances may affect QOZ benefits.