Opportunity Zones

[GreenEggs]

Does anybody have experience with investing in Opportunity Zones or OZ funds?

I recently sold some property & am concerned about the capital gains.

 

[jazz4cash]

No. It seems like the folks promoting these are not the most well known trusted entities and the opportunities around here seem risky.

 

[Senator]

Does anybody have experience with investing in Opportunity Zones or OZ funds?

I recently sold some property & am concerned about the capital gains.

If you already sold it and closed, you are likely out. If you did not already have a place for the money in some sort of escrow, you likely are already subject to capital gains taxes.

I know a 1031 exchange is out if you ever took possession of the funds, even for a second, like signing over a check.

Unless you are concerned about capital gains on the new investment.

EDIT: You may be OK.

Invest the realized capital gain into a Qualified Opportunity Fund within 180 days of realization. No intermediary is required for this transaction. An investor can invest directly into an Opportunity Fund themselves.

 

[GreenEggs]

I also read that I have 180 days. I was hoping some folks here had some experience or advice about Opportunity Zones.

What are other folks here doing about large capital gains from selling businesses and real estate? I'd think it would be a hot topic around here.

 

[Senator]

I also read that I have 180 days. I was hoping some folks here had some experience or advice about Opportunity Zones.

What are other folks here doing about large capital gains from selling businesses and real estate? I'd think it would be a hot topic around here.

I have done a 1031. Likely I will do a reverse 1031 the next time. It's far easier to identify the one to sell, than the one to buy.

I am also looking at DSTs.

And doing a 100% managed option. A structured sale annuity is another.

There are only a handful of true real estate investors in this forum. Overall, only 3% of the population invests in it.

 

[RenoJay]

I made the tough choice to pay big cap gains tax bills in the past year. I felt O Zones were too new and could have issues as yet unknowable. Furthermore, my big thesis in realizing big gains was that we’re in Bubble 3.0, and therefore most everything (including the buildings underlying O Zone funds) is overvalued. I’d certainly have preferred not to pay such a huge tax bill last year, but ultimately I don’t believe there’s any free lunch.

 

[BeachOrCity]

I have experience with this. You have 180 days after the sale and you don’t have to declare like a 1031. The 180 days works different for rental properties than it does for stocks. The rules on this are not final but the clock may not start until year end.

Lots of sponsors. Definitely a lot of crap out there but also decent folks.

You don’t have to invest all the boot or invest the full cost or price of your sold property. You can invest part or all of the gains in one or multiple oz properties or funds.

 

[GreenEggs]

I have a few questions.

1) Say I have 5 lots and the CG is $500K each. I just sold one and don't know how many more will sell this year (or within 180 days either). I find a property in a Qoz that is $2M that I decide to purchase now. Can I roll the CGs when I sell the remaining lots into this property? (If so, can I increase the price as if I'm selling it to myself?)

2) If I purchase undeveloped land how is the amount determined for the required capital improvements?

3) Can funds be moved from the sell of a Qoz property or fund into another Qoz property or fund within the 10 year time frame, or is it required to remain in the initial investment the entire time? If funds are allowed to be moved from one investment to another, what is the time frame allowed between selling and purchasing a replacement asset?

 

[CaliKid]

I believe a traditional 1031 is a lot simpler. However, you can use these to defer gains from sales other than real estate like businesses or stocks.

 

[BeachOrCity]

1. The deadline of 180 days applies to putting the money in a QoZ "FUND". The fund can be your own pass thru LLC, which you self declare as an OZ fund. Then you have a new deadline for the fund to make the investment in the property and meet the improvement requirements (I think about a year, but not positive).
Remember the proposed regs will start the 180 day clock on your 1231 gains for the full year as calculated on 12/31.
The timing and amounts are complicated, but are well written up...you can see one article here:
https://www.accountingtoday.com/opi...ns-tranche-ii-clarifies-important-information

2. Not entirely sure if you buy vacant land how the minimum $$$ work. There is a substantial improvement test if you buy an improved property, but not sure on vacant land. you definitely have to improve it and have more than the 180 days to do that, but there are rules around this.

3. Yes you can move, I think the safe harbor is 1 year between them. But you reset the 10 year period when you move (I think).

Declaring your own LLC to be an OZ fund is easy. What is not as clear is getting under all the regs on timing and amounts etc. I would find an accountant you specializes in this, or tax attorney who does the same to guide you. Don't pay an accountant to figure it out, pay someone who does this for a living to guide you.

You can also put the money in someone else OZ fund. Much easier, but you lose control and some of the profits to the general partner.

I have a few questions.

1) Say I have 5 lots and the CG is $500K each. I just sold one and don't know how many more will sell this year (or within 180 days either). I find a property in a Qoz that is $2M that I decide to purchase now. Can I roll the CGs when I sell the remaining lots into this property? (If so, can I increase the price as if I'm selling it to myself?)

2) If I purchase undeveloped land how is the amount determined for the required capital improvements?

3) Can funds be moved from the sell of a Qoz property or fund into another Qoz property or fund within the 10 year time frame, or is it required to remain in the initial investment the entire time? If funds are allowed to be moved from one investment to another, what is the time frame allowed between selling and purchasing a replacement asset?