Real Estate Journal — Owners, Developers & Managers — November 23 - December 13, 2018 — 3C
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M id A tlantic
O wners , D evelopers & M anagers
By Leonard C. Green, CPA, MBA, John B. Wollenberg, CPA, JD, MBA, The Green Group Newly Enacted Opportunity Zones Offer Unique Opportunity for Tax Savings T Certification on the amount of the gain that can be deferred. Permanent Exclusion the next 180 days invest the gain in a QOF, you can elect to defer the gain.
Owners, Developers &Managers Under the proposed regula- tions, if the tangible property he recently enacted Tax Cut and Jobs Act intro- duced two tax election benefits for investments in qualified “Opportunity Zones.” Opportunity Zone (OZ) Description An OZ is a government des- ignated community created to spur economic development and job creation in distressed communities by providing tax benefits to investors. These benefits are available even if the investor does not live, work or have a business in an OZ as long as they invest in the Zone. What is a Qualified Opportunity Fund (QOF) It is a vehicle, either a part- nership (including a limited li- ability company) or corporation for investing in eligible property that is in an OZ and that uti- lizes the investor’s gains from a prior investment for funding the QOF. The Fund cannot invest in another QOF and must hold at least 90% of its assets in OZ property, i.e. (1) OZ Stock, (2) OZ Partnership Interests or (3) OZ Business Property. Qualifying Property The qualifying property needs to be either (a) tangible property acquired after December 31, 2017 used in the Fund’s trade or business where the original use of the property is in the Fund or (b) the Fund substantially improves the property (within 30 months the improvement additions exceed the original cost basis).
An eligible taxpayer will self-certify with new Form 8996. Bottom Line The OZ may prove to be one of the most important bits of legislation to spur investment into qualified property and defer taxes. You should consult with your professional advisors. Leonard C. Green, CPA, MBA is Founder and Chair- man of The Green Group in Woodbridge, NJ. John B. Wollenberg, CPA, JD, MBA is Sr. Tax Man- ager at the Green Group.
Under this election, you can defer the gain until the later of the date on which the in- vestment is sold or December 31, 2026. To get maximum benefits, your builder should have the intention of this be- ing a long-term project. There is a step-up in basis for capital gains reinvested in an OZ. These reinvestment provisions should be initiated before December 31, 2019 if your objective is to obtain the maximum 15% step-up. There is no dollar limitation
You can permanently ex- clude any post-acquisition capital gains on an investment in an OZ if the investment in the Fund has been held for ten years. QOF Investment The proposed regulations clarify that an investment must be an equity interest, including preferred stock or a partnership interest with special allocations. An inves- tor can borrow money to make the investment, even using the investment as collateral.
is a building, then “substantial improvement” is measured only by the building’s basis, not including the cost of the land. Tax Election Benefits Deferral and Possible Reduction in Tax to Year 2026 When you sell stock or other property for a gain and within JohnWollenberg Leonard Green
YOUR GUIDE TO THE NEW OPPORTUNITY ZONE INVESTMENT INCENTIVES
OPPORTUNITY ZONES The Green Group is blazing the trail in helping clients take advantage of this new and powerful tax benefit.
OUR CREDENTIALS
Skilled in reducing, deferring and eliminating taxes. Experienced in leveraging your investment. Have assisted with directing over $10 million investments in qualified opportunity zone property.
a section of the Mid Atlantic
Real Estate Journal Phone: 781-740-2900 Fax: 781-740-2929 www.marejournal.com
Let us guide you through the intricacies of the Opportunity Zone Program by reaching out to one of our real estate industry specialists today. We are confident that this new investment opportunity will result in saving taxes.
900 Route 9 - Suite 601, Woodbridge, NJ 07095 732 - 634 - 5100 www.greenco.com
S ection P ublisher Steve Kelley skelley@marejournal.com
S ection E ditor Karen Vachon
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