Opportunity Zone (OZ) investing has evolved from a niche tax incentive into a durable component of sophisticated wealth planning strategies. For ultra-high-net-worth investors navigating liquidity events, concentrated positions, or multigenerational planning objectives, Opportunity Zones can serve as a powerful, nuanced tool when deployed thoughtfully.
Our recent discussion with Natalie Mason, Co-Head of Development at Capital Square Partners, focused on demystifying Opportunity Zone investing and clarifying where it may and may not fit within an advanced portfolio.
Here are some of the key takeaways from that conversation:
A Brief Refresher: What Are Opportunity Zones?
Opportunity Zones were established under the 2017 Tax Cuts and Jobs Act to incentivize investment into historically underinvested communities. The structure is straightforward but impactful:
- Investors may reinvest capital gains from virtually any source (business sale, stock, real estate, artwork).
- Gains must be reinvested within 180 days of realization.
- If held for 10 years, any appreciation on the OZ investment may be permanently exempt from federal capital gains tax.
Unlike other federal incentive programs, Opportunity Zones are a “by-right” tax benefit. There are no discretionary approvals or complex government allocation processes. Compliance is achieved through proper structuring and reporting.
The Misconception About “Waiting”
A persistent misconception is that investors should delay OZ investments until the next iteration of the program fully takes effect in future years. In reality, 2026 may represent a particularly compelling entry point.
Two key reasons:
- The 180‑Day Rule Limits Optionality
Many investors simply do not have the flexibility to wait. Capital gains triggered by company sales, large equity positions, or real estate dispositions must be deployed within a strict window to qualify.
- Known vs. Unknown Risk
Current Opportunity Zone census tracts are well-established. Investors can visit neighborhoods today and evaluate how they have evolved over the last decade. Future redesignated tracts, by definition, will be lower-income and less proven, introducing greater uncertainty.
For investors seeking to manage risk alongside tax efficiency, this distinction matters.
The Importance of Market Familiarity and Repeat Execution
At its core, Opportunity Zone investing is real estate development paired with tax advantages. The quality of outcomes depends heavily on two factors:
- Market selection
- Sponsor experience
Capital Square’s approach illustrates this dynamic. By repeatedly developing in the same Richmond, Virginia submarket—deploying capital across multiple OZ funds—the firm has built deep insight into renter demand, construction dynamics, and long-term economic drivers.
For ultra-high-net-worth investors, this kind of repeat execution can meaningfully reduce idiosyncratic project risk.
Understanding the Investment Lifecycle
An Opportunity Zone investment follows a familiar real estate arc:
- Initial investment (capital gain reinvested)
- Development and construction phase
- Lease-up and stabilization
- Refinancing
- Long‑term hold and eventual sale
Two elements within this lifecycle are particularly relevant from a tax-planning perspective.
The Fair Market Value Adjustment: A Nuanced Planning Opportunity
While the deferral benefit on original capital gains expires at the end of 2026, OZ law includes a lesser-known provision: investors must recognize the lesser of:
- The original deferred gain, or
- The fair market value (FMV) of the investment at that time
For projects still under construction or early stabilization at yearend 2026, third-party appraisals may support valuations below original invested capital due to construction risk, illiquidity, and lack of control.
For the right investor, this mechanism has the potential to reduce the taxable amount recognized, offering a form of partial tax sheltering even in later-stage OZ investments.
Cash-Out Refinancing: Liquidity Without Tax Friction
As properties stabilize, many OZ developments are refinanced. Importantly:
- Refinance proceeds are typically treated as a return of capital
- As such, they are not taxable upon receipt
Historically, refinancings have returned meaningful portions of invested capital, sometimes while the investor continues to own the asset and preserve future appreciation potential.
This feature can ease liquidity constraints associated with long holding periods and help offset earlier tax payments.
Risks, Constraints, and Suitability
Opportunity Zones are not appropriate for every investor. Key considerations include:
- Illiquidity: Capital is often tied up for a decade
- Development risk: Construction timelines, costs, and leasing outcomes matter
- Interest rate exposure: Particularly during development and refinancing
- Portfolio fit: OZs must be evaluated within the broader context of cash flow needs, diversification, and estate planning goals
For ultra-high-net-worth investors, the decision to allocate to Opportunity Zones should be made alongside trusted advisors, with close attention to sponsor quality, market fundamentals, and overall balance sheet liquidity.
A Durable Planning Tool When Used Intentionally
Now made permanent, Opportunity Zones are no longer a temporary tax strategy. They represent a long-term fixture in advanced investment planning, particularly for investors facing large capital gains and seeking tax-efficient growth aligned with real-asset exposure.
When executed with discipline—by pairing experienced sponsors, proven markets, and thoughtful portfolio integration—Opportunity Zone investing can deliver a rare combination of tax efficiency, real estate economics, and social impact.
As always, the key question is not whether Opportunity Zones are attractive, but whether they are appropriate for you.
Moneta Disclosure: © 2026 Advisory services offered by Moneta Group Investment Advisors, LLC, (“MGIA”) an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment adviser does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Trademarks and copyrights of materials referenced herein are the property of their respective owners. Index returns reflect total return, assuming reinvestment of dividends and interest. The returns do not reflect the effect of taxes and/or fees that an investor would incur. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax or legal decision. An index is an unmanaged portfolio of specified securities and does not reflect any initial or ongoing expenses nor can it be invested in directly. Past performance is not indicative of future returns. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise.
Capital Square Disclosure: Securities offered through WealthForge Securities, LLC. Member FINRA/SIPC. WealthForge and Capital Square are not affiliated. Check the background of this firm on FINRA’s Broker Check. Alternative investments are speculative and illiquid.
