Opportunity Zones / Capital Gains

5 Replies

I have read many many articles on OZ but i still cant find the answer to this!...Please Help! :)

Can i as an individual buy a new build rental duplex or triplex in an OZ off a builder and qualify?. I read all the time you have to buy and property and then invest the same amount minus the land value. In my case i would still be adding value to a lot of land but it will already be completed before i own it. If anyone knows the answer this it would be much appreciated.

Thanks

Andy

Originally posted by @Andy Pillinger :

I have read many many articles on OZ but i still cant find the answer to this!...Please Help! :)

Can i as an individual buy a new build rental duplex or triplex in an OZ off a builder and qualify?. I read all the time you have to buy and property and then invest the same amount minus the land value. In my case i would still be adding value to a lot of land but it will already be completed before i own it. If anyone knows the answer this it would be much appreciated.

Thanks

Andy

 You need to add as much to the property as the building/improvement value when you purchase. 

So if you buy a house for $300k and $200k of that is the value of the building (not land) then you now need to spend $200k fixing it up further. 

Hi Natalie,

So what your saying is i need to build my own duplex on a lot of land myself to qualify?.. if a brand new duplex has just been completed by someone else and there selling it in an OZ your saying i can't buy it and claim i added value to it even though it was just a lot of land 6 months prior? ..

Thanks. 

Andy

Originally posted by @Andy Pillinger :

Hi Natalie,

So what your saying is i need to build my own duplex on a lot of land myself to qualify?.. if a brand new duplex has just been completed by someone else and there selling it in an OZ your saying i can't buy it and claim i added value to it even though it was just a lot of land 6 months prior? ..

Thanks. 

Andy

Correct. 

YOU have to do ADDITIONAL improvements. This is a program to revitalize areas. Not to encourage people to just buy new construction homes. 

The BUILDER could potentially qualify for the QOZ benefits. But you didn't do any thing to improve the area so you wouldn't. 

@Natalie Kolodij - If you have capital gains from sale of a rental property - Do you know if depreciation recapture gets deferred too? And do you have to use up passive loss carry over before you can defer the LTCG?

Example with rough numbers to explain

Initial purchase cost basis: 200K 

Depreciation over # of years: 30K

Sell Cost Basis: 250k 

This would mean tax is owed on 30k of depreciation recapture at 25% and 50k at LTCG rate. Now if one were to jump into an OZF - can you invest 80k and defer all? Or is the 30k depreciation recapture owed this year and only 50k can be thrown into an OZF.

And then just to complicate things further if there's passive loss carryover of lets say 10k - does that have to get used first further reducing the capital gains that can be invested to either 70k or 40k?

Thanks

Purav