Defer Taxes By Re-investing In Qualified Opportunity Zones (QOZ) Real-Estate

Many babyboomers are exiting their businesses however doing it the wrong way and leaving a significant amount of money on the table. Have you heard about the greatest tax incentive? This tax incentive is an investment in new real estate developments in qualified opportunity zones.

Your are probably asking: What is a Qualified Opportunity?Zone?

The Tax Cuts and Jobs Act of 2017 introduced Qualified Opportunity Zones (QOZs), a strategic initiative designed to offer investors a tax-advantaged avenue for deploying capital gains into targeted communities undergoing economic development. Tailored for accredited investors with a pragmatic approach to financial stewardship, this program presents an opportunity to optimize tax efficiency while contributing meaningfully to socially impactful investments within designated zones.

Distinguishing itself from conventional investments, a QOZ investment presents investors with dual tax advantages:

1. Deferral of taxes on capital gains.

2. Full elimination of taxes on profits from the opportunity fund if held for a decade or longer.

For investors to participate and reap the tax benefits, they need to invest in a QOZ fund within 180 days of a capital gain event.

The allure of deferring current capital gains taxes is a key feature of QOZ investments. Investors can capitalize on this opportunity by rolling over gains from appreciated assets, such as the sale of a business, within 180 days of the transaction. If the gain stems from a partnership, LLC, or S-corporation, individuals have until early September of the subsequent year to reinvest in a QOZ fund, thereby deferring their tax obligation. For instance, those with 2021 gains from a K-1 have until Sept. 9, 2022, to reinvest in a QOZ fund.

Additionally, investors holding capital loss carryforwards have strategic choices. They can offset these carryforwards against any capital gains, effectively avoiding tax. Alternatively, they can invest gains in a QOZ fund, reserving the carryforward for 2026. This approach not only leverages the benefits of a QOZ investment but also unlocks the potential for tax-free growth if the investment is held for a decade. It's essential to be mindful of potential state tax considerations that could impact the utilization of capital loss carryforwards.

The pinnacle of tax-saving potential within a QOZ investment emerges after a decade of commitment. Holding the qualified investment for at least 10 years translates to a remarkable tax forgiveness scenario, wherein the post-rollover appreciation portion becomes entirely tax-free. Unlike mere deferral, this disciplined approach culminates in a lasting exemption from taxes on the accrued growth, presenting a compelling case for long-term investors. If you have a captive insurance for your business you can also benefit from compounding your capital tax free. (To know more about captives in realestate Read here "How To Use A Captive Insurance Structure In Your Real Estate Portfolio To Manage Risk, Keep Premiums & Increase Shareholder Wealth")

Most states align with the U.S. Treasury on Opportunity Zones, amplifying the potential for substantial tax savings. The law further grants flexibility, permitting investors to retain the investment beyond the 10-year threshold, with January 2048 marking the maximum statutory liquidation deadline.

It is crucial to acknowledge the prospective QOZ legislation that might feature in the upcoming tax extender's bill. This legislation, if enacted, stands to enhance the QOZ program by extending its duration, providing an additional two-year deferral, and allowing reductions in deferred capital gains tax.

In summary, the realm of QOZ investments unfolds a tapestry of significant tax benefits. However, prudent decision-making necessitates collaboration with a qualified advisor to meticulously analyze the program's nuances, guiding business owners and investors in making well-informed choices regarding the timing and magnitude of their investments.

Here is a list of QOZ Realestate Developments:

Hilite Seattle, WA | Multifamily & Retail

• Trent Development & Hatteras Sky
• Under Construction

Skye on 6th

• Phoenix, AZ | Multifamily & Retail
• Hubbard Street Group
• Under Construction

FAT Village

• Fort Lauderdale, FL | Mixed Use
• Hines

Easton Park

• Austin, TX | Multifamily
• Hines

Ember

• Seattle, WA | Multifamily & Retail
• Trent Development & Hatteras Sky

Brava

• Houston, TX | Multifamily
• Hines
• Under Construction

Eleven West

• Portland, OR | Multifamily & Office
• Downtown Development Group & Gerding Edlen
• Under Construction

The Finery

• Nashville, TN | Multifamily & Office
• Hines
• Under Construction

Mica RINo

• Denver, CO | Multifamily
• Hines
• Under Construction

The Mercantile

• Omaha, NE | Multifamily
• Hines
• Under Construction

Cormac

• Charleston, SC | Multifamily & Retail
• Lennar
• Under Construction

Ripley II

• Silver Spring, MD | Multifamily
• Washington Property Company
• Under Construction

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There’s also another one demanding you to go back three spaces, which in one position will land you on Vine Street. So there’s an overwhelming case for having the orange sites. Now, most people do not know that.

Quote

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