Defer Your Taxes Opportunity - Opportunity Zones

Investor · San Francisco, CA · Member since 2016 · 17 posts · 4 votes

With the new tax reform it brought a new chance for us to defer our taxes with Opportunity Zones. With the Investing in Opportunity Act, it will allow investors to defer their taxes by re investing their money into an "opportunity zone". This is very similar to the 1031 exchange, however it allows gains on property AND stocks to be deferred for 9 years.

Opportunity zones are designated areas of each state (which tend to be more developmental/low income areas) where the reinvestment occurs.

The basis of the property increases 10% of your original gain at the 5 year mark, another 5% at the 7 year mark, and after 10 years the gain is capped off.

New and exciting chances for us to defer taxes for those that invest in real estate and stocks.

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Ashish AcharyaBusiness Member

CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes

Yes, the benefits are related to capital gains.

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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
8y
@Tony Hoong , thanks for sharing this.
Yes, many people have benefited from this in the past too. similar concept.
In addition to that:
As of now, the zones are approved for these states. American Samoa; Arizona; California; Colorado; Georgia; Idaho; Kentucky; Michigan; Mississippi; Nebraska; New Jersey; Oklahoma; Puerto Rico; South Carolina; South Dakota; Vermont; Virgin Islands; and Wisconsin.
Qualified Opportunity Zones retain this designation for 10 years. Investors can defer tax on any prior gains until no later than Dec. 31, 2026, so long as the gain is reinvested in a Qualified Opportunity Fund, an investment vehicle organized to make investments in Qualified Opportunity Zones.
In addition, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor would be eligible for an increase in its basis equal to the fair market value of the investment on the date that it is sold.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Ashish Acharya:

@Tony Hoong , thanks for sharing this.
Yes, many people have benefited from this in the past too. similar concept.
In addition to that:
As of now, the zones are approved for these states. American Samoa; Arizona; California; Colorado; Georgia; Idaho; Kentucky; Michigan; Mississippi; Nebraska; New Jersey; Oklahoma; Puerto Rico; South Carolina; South Dakota; Vermont; Virgin Islands; and Wisconsin.
Qualified Opportunity Zones retain this designation for 10 years. Investors can defer tax on any prior gains until no later than Dec. 31, 2026, so long as the gain is reinvested in a Qualified Opportunity Fund, an investment vehicle organized to make investments in Qualified Opportunity Zones.
In addition, if the investor holds the investment in the Opportunity Fund for at least ten years, the investor would be eligible for an increase in its basis equal to the fair market value of the investment on the date that it is sold.
if your a dealer in real estate this does not work right.. Like the gozone did in MS with the 179 deduction year one.. type of thing
this is just cap gains defferal ????
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
8y
Yes, the benefits are related to capital gains.
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Tyler Kastelberg
Real Estate Technology · San Francisco, CA · Member since 2016 · 262 posts · 265 votes
8y
@Tony Hoong @Ashish Acharya @Jay Hinrichs
Quick addition: You must invest through a US Treasury approved "Opportunity Fund" to capture the benefits of this program. As of today (4/17/2018), the process to create an Opportunity Fund hasn't been established.
To be continued!
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
8y
Originally posted by @Tyler Kastelberg:

@Tony Hoong @Ashish Acharya @Jay Hinrichs
Quick addition: You must invest through a US Treasury approved "Opportunity Fund" to capture the benefits of this program. As of today (4/17/2018), the process to create an Opportunity Fund hasn't been established.
To be continued!
and there in lies the rub..
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Rob Drum
Real Estate Broker · Bradenton, FL · Member since 2017 · 544 posts · 363 votes
8y
Just to update the thread... It looks like the certification process may be a self-certification form filed with your taxes..
Not too much red tape involved!
https://www.novoco.com/news/eligible-taxpayers-will-self-certify-be-qualified-opportunity-fund
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Kevin Wattenbarger
Real Estate Broker · Panama City, FL · Member since 2015 · 38 posts · 15 votes
8y
Investing in Opportunity Zones through qualified Opportunity Funds (QOF)is very interesting to me and the qualified census tracts in my market appear to be poised for growth based on several factors. This appears to be a great opportunity to encourage long term investments into designated areas. No doubt the preferential treatment for capital gains seem to gather much of the headlines. I understand regulations are still pending from Dept of Treasury but what are your thoughts / expectations about the benefits for an investor that is not looking to invest money from capital gains? What if an investor wants to invest in a QOF with dollars from ordinary or passive income sources as their initial investments/ contributions into a QOF? I would think that an investor who invest ordinary income would still benefit from the step-up in basis if that investment is held for 10 years in a QOF? What do other think? Investing in promising OZs that have a good chance for appreciation through QOF seems to be a viable options for investors that are not just looking to defer capital gains. Do others agree?
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Aalap Sharma
Investor · Fremont, CA · Member since 2017 · 13 posts · 3 votes
7y
For a noob like me where can I go and look for these QOF?
What if my existing rental fall under a designated OZ?
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Ray Tripp
Property Manager · Salt Lake City, UT · Member since 2018 · 8 posts · 2 votes
7y
@Ashish Acharya how do I find out where these areas are because I’m putting up a house that’s not on the mls but is probably in an opportunity zone?
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
7y
Originally posted by @Ray Tripp:

@Ashish Acharya how do I find out where these areas are because I’m putting up a house that’s not on the mls but is probably in an opportunity zone?
You just google a OZ map. And search for an address.
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Brian Dodd
Real Estate Agent · Napa, CA · Member since 2018 · 2 posts · 0 votes
7y
@Ashish Acharya if one has been deferring capital gains for decades and then invests now the entire sum, what would be the capital gains tax after ten years? 0?
Conversely if Someone has never invest in before and then invest in an opportunity zone, what is their capital gains tax after 10 years?
Can you or anyone recommend any webinars or podcasts that are up-to-date for opportunity zone investments? Emphasis on up-to-date, as I am aware the requirements have lightened up just a bit.
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Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
7y
Originally posted by @Brian Dodd:

@Ashish Acharya if one has been deferring capital gains for decades and then invests now the entire sum, what would be the capital gains tax after ten years? 0?
Conversely if Someone has never invest in before and then invest in an opportunity zone, what is their capital gains tax after 10 years?
Can you or anyone recommend any webinars or podcasts that are up-to-date for opportunity zone investments? Emphasis on up-to-date, as I am aware the requirements have lightened up just a bit.
There are two election with the OZ:
1) To defer your current capital gain (does not matter it from the previous deferral from 1031). That is your first question. You just defer, not totally avoid (can avoid 15% if held for 7 yrs).
2) To completely avoid the capital gain on the investment made in the OZ if held for 10 years.
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Brian Dodd
Real Estate Agent · Napa, CA · Member since 2018 · 2 posts · 0 votes
7y
@Ashish Acharya, thanks for the explanation. Please let me know if you come across any tutorials or webinars with up to date information. I would use it for sure, but it would also be useful to bring clients up to speed. The authority of a tax professional would be valued over a real estate agent like myself.
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