Private DIY Qualified Opportunity Funds

2 Replies

Hi all! I am reaching out the this community on a specific topic – DIY closed/Private OZ funds.

If there is anyone currently involved in or researched the Opportunity Zone Fund process to benefit from incentive programs to defer capital gains tax please share your thoughts or reach out to me. 
As per my research, it seems like a good feasible option but am trying to understand the complexity and additional costs + other burdens of this and for that purpose have a few questions.

Basically, I am trying to understand if there is a simple playbook for a small partnership fund that can be worth executing for a rental property without going into too much compliance and audit requirements. As per my understanding, there are 2 possible paths based on benefit/flexibility and complexity someone wants.

1). Simpler / Restricted: Buy a newly constructed house (from a builder) or a property never depreciated/amortized (No rental/business history) within OZ map and start renting it out for the first time (within 6 months of fund opening). That should qualify under "original use".

2). Flexible (but complex): If someone can't find above properties or doesn't want they need to do "substantial improvement". This includes increasing building (house excluding land) value by 100%.

Is there any other way which could be manageable by a small/personal fund? There are also provisions of getting additional 30 months (in addition to first 6 months) for improvements. Also if QOB is created as an additional layer where only >70% of funds need to be invested in QOB.


First of all I am seeking education/experience on the topic, wanting to hear the good bad and ugly that comes along with it knowing it is a program requiring many compliances from someone who experienced, researched or has expertise.

If I build a new house (on land) or remodel (old property) what would the mechanics of necessary QOF/QOB compliance look like and also cash holding rules for improvement?

How long can we hold cash in QOF before it has to be deployed? Does the safe-harbor rule allow for the whole 30 month period before asset value test is due? What does it take to show safe-harbor compliance.

QOF entity creation process – My understanding is we create LLC partnership and bank account and transfer money. From legal stand point is there any other work? From tax compliance perspective QOF LLC needs to file its own taxes with self-certification via 8996 form?

How/What is required for compliance of QOB entities if that needs to be created as form 8996 does not seem to have anything for QOB.

    Thanks Natalie Kolodij for your input. Yes, agree, for many of these question I'll need to hire some CPA/Attorney service. I have also run some of these questions at a high level with a CPA who has limited QOZ knowledge (and he says my understanding above for feasibility is correct). However, before I hire someone very expansive and invest more time/money on this path, I wanted to learn about experiences on this topic from someone who might have explored it personally or researched (but decided not to do it). I want to see if someone in this club did any research etc and hear the good bad and ugly that comes along with it.

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