Real Estate Agent · Wilmington, MA · Member since 2013 · 26 posts · 5 votes
I purchased a multi family in Los Angeles CA in 2013. The area was declared an opportunity zone in 2017. Now I'm wondering how I can take advantage of the capital gains savings retroactively if I sell. Any advice?
Accountant · McKinney, TX · Member since 2023 · 393 posts · 580 votes
3y
@Karen Lee I am a little unsure what you mean by retroactively saving but here is my high level explanation and a helpful link. The timeline to reinvest the proceeds from the sale of real property (and other personal property and capital assets in the case of QOZs) is 180 days which is the same for both 1031s and QOZs. There are a few key differences - one is that QOZs only require to defer the actual gain whereas with 1031s you must put all the net proceeds of the relinquished property into the exchange to get full deferral. With QOZs you don’t have much control since the sponsor of the fund makes all key decision so you have to do your due diligence. Some QOZ funds involve a single asset and some involve many and are geographically diverse. The QOZ might eventually be taxable (say in 2027 for the 2026 tax year) when the TCJA sunsets or the investment might not be taxable if held for long enough. In any event it’s probably not something that you can defer until death like with a 1031 exchange. So basically there are pros and cons to both depending on someone’s situation. Here is a link from the IRS website -
So if you are looking to sell either option might be appropriate and be helpful but you should weigh the pros and cons and work with your CPA in advance.
Investor · Los Angeles · Member since 2021 · 94 posts · 29 votes
3y
It won't impact your capital gains for the sale; However, I'd recommend speaking to a CPA since they could help go over your cost segregation and depreciation as well. The fact that it's an opportunity zone will improve its marketability like @Nathan Grabau said. If you'd like, I'm a commercial agent in LA and can connect you with a CPA
It won't impact your capital gains for the sale; However, I'd recommend speaking to a CPA since they could help go over your cost segregation and depreciation as well. The fact that it's an opportunity zone will improve its marketability like @Nathan Grabau said. If you'd like, I'm a commercial agent in LA and can connect you with a CPA
Thank you Matt. I'm actually an agent in Mass and New Hampshire and my accountant is based in Los Angeles. My accountant thought I might 1031 it in the same neighborhood and then sell but isn't the wait like 10 years for that?
It won't impact your capital gains for the sale; However, I'd recommend speaking to a CPA since they could help go over your cost segregation and depreciation as well. The fact that it's an opportunity zone will improve its marketability like @Nathan Grabau said. If you'd like, I'm a commercial agent in LA and can connect you with a CPA
Thank you Matt. I'm actually an agent in Mass and New Hampshire and my accountant is based in Los Angeles. My accountant thought I might 1031 it in the same neighborhood and then sell but isn't the wait like 10 years for that?
No, you shouldn't have to wait 10 years for that. It might benefit you to at least speak with or consult with an agent that is in the LA market. I sent you a connection request just in case you were looking to connect more
Accountant · McKinney, TX · Member since 2023 · 393 posts · 580 votes
3y
@Karen Lee I am a little unsure what you mean by retroactively saving but here is my high level explanation and a helpful link. The timeline to reinvest the proceeds from the sale of real property (and other personal property and capital assets in the case of QOZs) is 180 days which is the same for both 1031s and QOZs. There are a few key differences - one is that QOZs only require to defer the actual gain whereas with 1031s you must put all the net proceeds of the relinquished property into the exchange to get full deferral. With QOZs you don’t have much control since the sponsor of the fund makes all key decision so you have to do your due diligence. Some QOZ funds involve a single asset and some involve many and are geographically diverse. The QOZ might eventually be taxable (say in 2027 for the 2026 tax year) when the TCJA sunsets or the investment might not be taxable if held for long enough. In any event it’s probably not something that you can defer until death like with a 1031 exchange. So basically there are pros and cons to both depending on someone’s situation. Here is a link from the IRS website -
So if you are looking to sell either option might be appropriate and be helpful but you should weigh the pros and cons and work with your CPA in advance.
@Karen Lee I am a little unsure what you mean by retroactively saving but here is my high level explanation and a helpful link. The timeline to reinvest the proceeds from the sale of real property (and other personal property and capital assets in the case of QOZs) is 180 days which is the same for both 1031s and QOZs. There are a few key differences - one is that QOZs only require to defer the actual gain whereas with 1031s you must put all the net proceeds of the relinquished property into the exchange to get full deferral. With QOZs you don’t have much control since the sponsor of the fund makes all key decision so you have to do your due diligence. Some QOZ funds involve a single asset and some involve many and are geographically diverse. The QOZ might eventually be taxable (say in 2027 for the 2026 tax year) when the TCJA sunsets or the investment might not be taxable if held for long enough. In any event it’s probably not something that you can defer until death like with a 1031 exchange. So basically there are pros and cons to both depending on someone’s situation. Here is a link from the IRS website -
So if you are looking to sell either option might be appropriate and be helpful but you should weigh the pros and cons and work with your CPA in advance.
Thank you Matt. Your reply has given me A LOT to think about. I'm diving in now. Thank you.