Property lands in Opportunity Zone AFTER purchase

[Karen Lee]

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?

[Jeff Nash]

@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 -

https://www.irs.gov/credits-de...

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.