Opportunity Zones and Funds

8 Replies

I have 3 adjacent properties in the Los Angeles that are going to be in an Opportunity Zone.

One thing I cant find is how to go about finding funding from Opportunity Funds if I want to re-develop the land. Is this something the developer would look into? Or should I see how much money we would be able to raise from these funds before looking to construct a building?

@Etan Frankel although the government has a hard deadline of April 20th, 2018 to establish designated opportunity zones nation-wide, the investments wont happen for a short period afterwards while the IRS works on designating qualifications for the certification of an Opportunity Zone Fund.

As soon as the certifications have been designated and the flood gates for applications are opened, i am sure you will begin to see many Opportunity Fund's pop up that would be eager to participate in the investment. In preparation for that moment I would recommend evaluating/analyzing the investment to better understand what is required.

I believe that Opportunity Funds will present a rather large incentive to those wishing to "cash out" on their investments by selling their assets and exchanging their proceeds into a qualified opportunity fund. Why wouldn't you want to defer, reduce or entirely eliminate any unrealized capital gains tax?

for anyone unfamiliar with Opportunity Zones and their part in the new tax plan, read this.

We are just beginning to see the very first QOF’s form, however there are not many yet. The U.S. Treasury Department and Internal Revenue Service are working on QOF guidelines and regulations. As of now, we understand that the IRS is allowing self-certification of Qualified Opportunity Funds. To self-certify, a taxpayer merely completes a form (which will be released in the summer of 2018), and attaches that form to the taxpayer’s federal income tax return for the taxable year. Consequently, no approval or action by the IRS is required to certify a taxpayer. The IRS also says it will provide more details and additional legal guidance over the next few months.

Yes, but it kind of sucks if you already own the property and want to develop it yourself. Is there a way to apply property you already own into an opportunity zone investment?

@Adrian Chu I believe it has to be a sale to an unrelated party. You could potentially still own 49% of the property and sell to an investment company that has 51% control but I would need to verify this

I believe you can start a fund and take and ownership % in the fund by moving the property into the fund. Not 100% certain though.

Originally posted by @Etan Frankel :

I believe you can start a fund and take and ownership % in the fund by moving the property into the fund. Not 100% certain though.

 Then it would be a related party transaction. It is my understanding that it's not allowed.

Super interesting topic.  I just realized I own a condo in Moreno Valley that's going to be in an OZ.  Wondering how that would work since I've owned it for 4 years now.

Originally posted by @Jeff W. :

Super interesting topic.  I just realized I own a condo in Moreno Valley that's going to be in an OZ.  Wondering how that would work since I've owned it for 4 years now.

Unfortunately there is no benefit to you unless you have a buyer that is wanting to "substantially improve" the condo, i.e. double the improvement basis.  This works best for substantial rehab or ground up development.

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