I got a $1M offer on a 16 unit building and I need to 1031...help

[Sean Morrisey]

Received a $1M offer on a 16 unit building that I purchased back in March - leaving me with a nice profit.

However, I am expecting 30% in short term capital gains between the state and federal and a prepayment penalty of $6000.00.

Thus, unless I can 1031 into another deal...this transaction may be tough to put together.

Any ideas on how I should source deals and find a way to defer my taxes?

Thanks! You all are the brightest and best!

[Austin Hendrickson]

@Lee Ripma As it sits right now "regular" money can be used to invest in QOZ Funds however they do not give rise to any tax benefits. The investment into the fund must be a capital gain in order to get the 10+ year hold benefits from appreciation and depreciation. If cash and capital gains are mixed then it gives rise to a pro rata treatment for tax benefits.

For example if an investor invested $500k capital gains and $500k cash into a QOZ fund (and received stock) only 50% of the appreciation on the stock after 10 years would be tax free as only 50% of the initial investment was capital gains.

The form to self-certify as an OZ fund has yet to be released by the IRS.

If you have already invested cash into a QOZ for the tax benefits I would highly recommend you speak with a specialized real estate CPA who is well versed in QOZ's.