Who are my opportunity zone experts?

[Mindy Jensen]

Who are my opportunity zone experts? I have an opportunity to invest in a building/business in an opportunity zone in my hometown. I have some stocks to sell in early 2019 which will fund the purchase. 

How do I note this on my taxes? Do I pay taxes now and get credited after holding for 10 years?

I know I have to "significantly improve" the value of the property. Is there a timeframe for the improvement? Is "significantly" defined or left to my own judgement?

Any links to documents or guidelines would be supremely helpful. Thank you.

[Natalie Kolodij]

Hey Mindy, 

Quick and dirty: 

You will make an election on your 2018 taxes that you're deferring the gain on the sale of stocks. 

You pay no tax now. 

You DO pay tax Dec 31, 2026 OR when the property is sold, whichever is earlier. 

Significant improvement was just re-defined by the latest IRS release to be the amount of the BUILDING basis (originally it was worded more like purchase price of the property) but now basically if your property cost $50k and building value was $20k ....you must put $20k into the property. 

You have 30 months to do the renovations. It's worded to where it can be read as 30 months at any point during hold, but that doesn't make sense to me. I think intention was buy, renovate, rent. 

If you hold for 5 years - 10% of your initial deferred gain from those stocks is removed (stepped up basis) 

If you hold for 7 years- 15% of your initial deferred gain from those stocks is removed. 

If you hold for 10 years- any NEW appreciation/gain related to the property in the QOZ (totally unrelated to the stocks you're selling) can be sold TAX FREE. (Step up in basis of the property to current FMV)

Hope this helps! I'm putting together some info/ video on this next week I can shoot your way once It's done. 

https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions