Advanced Taxation Question Related to Opportunity Zones

[Jason Velie]

Hello everyone! I believe this is my first post.

Let me start by saying that I will ask my CPA these questions, but I want to know what I’m talking about a little better first so I’ll know exactly what to ask.

This year, I completed my first flip and netted about $26k before taxes.

Earlier this week, I bought a rental (singlewide with land) for $15k, and I’ll put in about $3k to replace the septic lines and that’s it. Both the flip and the rental are near Wilmington, NC.

Listening to a BP podcast earlier today, I learned about Opportunity Zones, which I’ve never heard of before. I then looked up my local Opportunity Zones, and it turns out that both my flip and my new rental are in opportunity zones. With that said, here are my questions:

1) Am I understanding correctly that I will not have to pay any capital gains taxes on the rental if I keep it for at least 10 years? (The trailer is on a permanent foundation and deeded with the land as real estate.)

2) Is there a way my CPA can consider my $18k investment in the rental as coming from the $26k flip profit so I won’t have to pay income tax on that $18k?

3) Are there any other creative tax solutions that I could utilize this tax year since the flip and rental are both in Opportunity Zones?

Thanks!

[Ashish Acharya]

Originally posted by @Jason Velie:

Hello everyone! I believe this is my first post.

Let me start by saying that I will ask my CPA these questions, but I want to know what I’m talking about a little better first so I’ll know exactly what to ask.

This year, I completed my first flip and netted about $26k before taxes.

Earlier this week, I bought a rental (singlewide with land) for $15k, and I’ll put in about $3k to replace the septic lines and that’s it. Both the flip and the rental are near Wilmington, NC.

Listening to a BP podcast earlier today, I learned about Opportunity Zones, which I’ve never heard of before. I then looked up my local Opportunity Zones, and it turns out that both my flip and my new rental are in opportunity zones. With that said, here are my questions:

1) Am I understanding correctly that I will not have to pay any capital gains taxes on the rental if I keep it for at least 10 years? (The trailer is on a permanent foundation and deeded with the land as real estate.)

2) Is there a way my CPA can consider my $18k investment in the rental as coming from the $26k flip profit so I won’t have to pay income tax on that $18k?

3) Are there any other creative tax solutions that I could utilize this tax year since the flip and rental are both in Opportunity Zones?

Thanks!

1) no
2) no

Just buying a property in a OZ doesn’t mean anything. Also, only cap gain can be deferred, not ordinary flip income.

there are 10s other requirements needed to properly establish and operate the OZ fund.