Opportunity Zone 2.0 Great for Buyers; But What About Sellers?

Opportunity Zone 2.0 is shaping up to be an interesting new development for rural investment, especially for farmland owners and buyers looking ahead to 2027. With US Treasury set to certify the new OZ 2.0 census tracts on January 1, 2027, planning for tax‑advantaged projects is underway.

However, in an OZ 2.0 transaction, the seller still owes capital gains tax on the sale. OZ 2.0 does not give tax benefits to the seller of the property. The only party who can receive OZ benefits is the buyer who reinvests their own capital gains into a Qualified Opportunity Fund (QOF) and holds that investment for the required period. The seller recognizes gain in the year of sale unless they use a separate deferral mechanism like Section 453 installment sale or more specifically the monetized installment sale process provided by Farmers First Trust.

A monetized installment sale gives the seller a way to turn a land sale into immediate liquidity without triggering capital gains tax in the year of closing. Instead of recognizing the gain upfront, the seller defers it under Section 453 while receiving a tax‑free loan that functions like cash from the sale. The structure is backed by a standby letter of credit and designed to unwind cleanly when the installment note matures. For sellers in OZ 2.0 tracts, where the buyer gets the incentive, not the seller, this becomes a powerful way to keep liquidity and defer taxes.

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The following are highlights of OZ 2.0 found at https://www.hud.gov/opportunity-zones/updates

I. Opportunity Zones Tax Benefits (The following can be found at: https://www.hud.gov/opportunity-zones/updates)

What are the tax benefits for investors investing in a Qualified Opportunity Fund (QOF) in OZ 2.0?

A rolling five-year deferral tied to investment date; basis step-up of 10% at five years (or 30% if using a QROF that invests in a rural area OZ); and exclusion of new gains if held 10 years or longer. If held beyond 30 years, full stepped-up basis at the 30th anniversary.

What are the key tax benefits for investors investing in a QOF that invests in a property or business in a designated Opportunity Zone?

The three key tax benefits for investors who invest in a QOF that invest into a designated OZ census tract are: tax deferral, tax exclusion, and step-up in basis.

Where can I get additional information about Opportunity Zones?

The U.S. Department of Housing and Urban Development (HUD) website has information pertaining to OZs including the official map of designated OZ census tracts located at www.hud.gov/opportunity-zones.

Where can I find the regulations that govern the Opportunity Zones tax incentive program?

Regulations are maintained by the U.S. Department of the Treasury and the IRS, under Internal Revenue Code Section 1400Z and associated IRS guidance located at www.irs.gov/credits-deductions/businesses/opportunity-zones.

II. Definitions (The following can be found at: https://www.hud.gov/opportunity-zones/updates)

What is the definition for a “Qualified Rural Opportunity Fund” or QROF?

The OBBBA created a new OZ industry definition know as the “Qualified Rural Opportunity Fund” (QROF). A QROF must hold at least 90% of its assets in qualified opportunity zone property which:

• Is a QOZ Business (QOZB) property all of use of which was in an OZ comprised entirely of a “rural area”; or

• Is a QOZ Stock (QOZS) or QOZ Partnership Interest (QOZPI) all of which all the tangible property owned or leased is QOZB property and substantially all the use of which is in an OZ comprised entirely of a “rural area.”

III. Key Dates (The following can be found at: https://www.hud.gov/opportunity-zones/updates)

- 7/1/26: New OZ Census Tracts determination period begins

- Q4 2026: US Treasury will certify and designate new OZ 2.0 census tracts

- 1/1/27: OZ 2.0 Begins