What is an opportunity Zone

4 Replies

Hi Sandra,

An Opportunity Zone essentially deals with a building in a distressed area. In order to incentivize property owners to buy a building in this location, there are certain tax benefits associated with the building. Below is a good link to frequently asked questions regarding them.
https://www.irs.gov/credits-de...

Hope this helps!


Austin

Hi @Sandra Ibrahim . The concept of Opportunity Zones was created under The Tax and Jobs Act. In short, an opportunity zone is an area, typically 'distressed', that is designated by that the state to be eligible for preferential tax treatment.

A major key to the program that I've seen a lot of talk around OZs glide over is that, in order to qualify for tax breaks, 'substantial improvement' must be made to the property. An exact definition of substantial improvement from the IRS's website is below:

Property is substantially improved if, during any 30-month period beginning after the property is acquired, additions to the basis of the property exceed an amount equal to the adjusted basis at the start of the 30-month period.

Source: Opportunity Zones FAQ

@Sandra Ibrahim an opportunity zone is a deal with a building or property in a distressed area or underperforming areas in an urban area or city. To incentivize property owners to buy the property, there are tax benefits tied in with the building. This helps revitalize communities or neighborhoods that would sit essentially vacant.

@Sandra Ibrahim

In short, if you have capital gains, you can defer them if you roll them into a Qualified Opportunity Fund(QOF).
A QOF is an entity(Partnership or Corporation) that invests in properties within the Qualified Opportunity Zone(QOZ).

There are many compliance/admin involved to keep the QOF compliant.