All Forum Posts by: Austin Hendrickson

@David M. There needs to be a sale to an unrelated party in order for the OZ benefits to be realized.

- @Adam Mayberry - if a developer is a part owner in the QOZ Fund then there may be some tax benefits there. I can hook you up with a good RE CPA who knows more if you would like. 

@John Fortes sounds like that would qualify just ensure the investment is being funded with capital gains and acquired through an OZ Fund.

@Holly High if you did not purchase the property using capital gains and did not purchase through a QOZ Fund then the investment will not qualify.

If you buy a new home and sell it to a consumer that would also disqualify you as you would not meet the ten year hold requirement

Any substantial improvement to the property must be 100% of your basis in the original property less the value of the land.

For example: You buy an apartment building for $600k, and allocate $50k to the land purchase. You are left with $550k, so you would need to reinvest at least $550k within 30 months for the investment to qualify for OZ treatment.

Thanks for the shoutout @Ryan Carriere 

Hope all is well!

Here is a high-level overview on OZ's - there is still guidance coming on many of the finer issues in the regulations

https://www.biggerpockets.com/forums/51/topics/586...

@Natalie Kolodij Makes sense - so then Mindy would not have a 2018 reporting requirement if she is funding the investment with a stock sale taking place in 2019

@Natalie Kolodij  Mindy mentioned she was selling the stocks in 2019, so even if she realizes the gain in 2019 she will have to report the election?

@Matt Ward Our firm has a monthly meeting with leaders from different offices who are taking the lead with OZ's and we have clients that are doing deals in various zones. We work with mostly construction and real estate clients so have a ton of interest in QOZ's.

A lot of the questions you mentioned above are still valid, so on complex deals some of our clients are holding off until further guidance is issued/understood. 

@Natalie Kolodij Correct it is purchase price excluding land value. Good clarification!

@Mindy Jensen Our firm is heavily involved in OZ's.

Couple comments:

1. You do not have to do anything for your 2018 tax return, however you will need to file Form 8996 to register as a Qualified Opportunity Fund prior to making the investment as all investments must be made through a QOZ Fund.

2. You will not pay any taxes on the stock gain until 12/31/2026 or until you sell the asset, whichever comes first. Your initial stock capital gain will be reduced to 85% after a 7 year hold period. Once you hold the business/property 10+ years all the appreciation is tax free.

3. You need to significantly improve the property by investing 100% of the purchase price back into the property. 

This might help: https://www.irs.gov/pub/irs-drop/reg-115420-18.pdf

See the bottom of page 62 for the substantial improvement requirement. You have 30 months after acquiring the property to complete the improvements.

Let me know if you have further questions.