All Forum Posts by: Jacqueline Gardiner

Hi Chris, I've been reading what I can find about these funds (not all of it accurate). The IRS site has some pretty good info, but the regulations aren't finalized yet and there's a lot up in the air.

I also looked to see if there have been any funds set up by others that smaller investors can contribute to. I found some, but all that I've seen are for accredited investors only and have some pretty high minimum investments ($100K seemed typical). 

On the other hand, it looks like it should be fairly easy to set up one's own fund. An LLC can be used, though it can't be a single member LLC. Once the LLC is set up and you have an EIN from the IRS, you can set up a bank account and put your cash in it. You self-certify the fund as an Opportunity Zone Fund later on when you file your tax return.

It looks like one then has either 30 months or 31 months to fully deploy the funds, including making improvements to any property that you purchase. But, it might be necessary to purchase the property within the first 6 months after the fund is set up. That's where it's getting a little murky for me. The rules about what you have to buy and how the property will be used are also not clear to me. But, I think there's time to figure that out - at least for a small project.

I'm thinking about jumping in - but also hoping to find someone else who has done it!

Hi Adam, You didn’t say whether you were living on this ranch, renting it out, or just holding it as an investment and a “flip” on the house. If it’s your primary residence, then you might be able to take the capital gains exclusion on a primary residence, but a 1031 exchange would not be applicable. If it’s an investment property, then you need to be able to show that your intent was to hold it for an investment (for example, by renting it out for at least 2 years). If you haven’t had it for very long and your intent was just to flip it, then I believe it’s plain ol’ taxable income. In that case, you might want to hang on to it and rent it out for a while to make it eligible for a 1031 exchange. If the ranch land is rented out for grazing or similar use, then some portion of the property might be eligible. In any case, a 1031 would require acquisition of a new property. Your tax liability would include any recaptured depreciation, but you would be able to deduct the cost of capital improvements.

Also, how is the market where the property is currently located? How are the taxes? Would you buy it today if you didn’t already own it? 

I know that my contract included that when I sold. There were no issues that ever came up, but there’s no downside to including it.

Hi Edem, The fact that it has been a rental and that you've owned it for a few years is good. That means that you should be able to do a 1031 exchange. However, you'll need to purchase another property in order to do the exchange. It will also need to be titled the same as the property that you selling (though it could later be transferred into your LLC). There are a lot of rules that must be followed. However, I think it might be possible for you to buy another property, use additional leverage when purchasing it, and get some of your equity out that could then be used for the improvements that you want to make on the fixer-upper. @Dave Foster is a very knowledgable intermediary who is active on this forum and can probably help you out with some details if that approach is of interest to you.

Hi Edem, How has the property been used? Is it a rental? It’s important in determining whether you qualify for a 1031 exchange. 

Hi Mike, 

I believe you could purchase a property on which you reside and also have an investment property, but you would have to do a reasonable allocation between the two and two separate sets of accounting. (I.e. if there are 10 residential units and 1 of them is your home, then perhaps 90% of the property could be the investment property and used for the 1031 exchange. The remainder would be your primary residence.) If you operate your plumbing business from the property, then some % would be allocated to business usage. It sounds like a bunch of accounting, but I think it is feasible. I’m sure a couple of the 1031 experts will chime in.

Hi Rebecca, Here are a few things you might want to consider. If he sells it to you for $1, then that is what your tax basis is, and anything more than that will be your gain. If you inherit it when he dies, then your stepped up basis will be the value at that time - which means you could exchange it then without any tax liability. He could put it into an LLC now and then gift you a portion of the LLC. The LLC could then do the exchange for something larger in which you might be partners. (I think you would have to wait for a year after putting it in the LLC before making that move.) This is all just food for thought. But, you should get some advice from someone knowledgable about taxes in addition to the lawyer.

@Richard Chang - I would suggest that you consider Rockwell debt-free properties. They have properties with NNN leases that you can buy into without having the funds for the whole enchilada. And, you aren't required to be accredited because they don't use leverage. They only seem to work with two tenants right now: Fresinius (which runs dialysis centers) and Noah's (which runs event centers). I did a 1031 exchange earlier this year and bought into one of each.

I considered buying a NNN property directly, but was told that I'd probably have to spend $2.5-$3M to get anything of decent quality with a strong tenant.

I am happy with the choice I made.

http://www.rockwelltic.com/

@Jack B. I recently completed a 1031 exchange with no problems whatsoever (sold 1 property in CA, and bought into two properties: one located in Utah and one in S.C.) I used Asset Preservation, Inc. out of Roseville, CA as my Q.I. 

https://apiexchange.com/

I am located in Florida and never met in person with anyone at the company, though I had several phone calls with a few different representatives. All went well.

Best of luck to you. It's not worth paying the taxes to avoid the hassle!