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Real Estate Journal — Spring Preview —April 26 - May 9, 2019 — 7C
M id A tlantic
Q ualified O pportunity Z ones
By Kathy Anderson, Progress Capital What qualifies as an OZ Investment?
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uried deep within the ‘2017 Tax Cuts and Jobs Act’ is a tax in-
entire $1Million. With a 1031 Exchange, the investor must roll the entire $1 Million into a new investment to enjoy the full tax benefits. How will each State treat investments in OZ for State Tax purposes? Most States have agreed to conform to the IRC as it relates to Opportunity Zones including New Jersey and New York. The bottom line is that an investment in an Opportunity Zone Property not only pro- vides tax benefits, but if the investment is made prudently
properties in Qualified Op- portunity Zones. Contact us if you have a capital gain or plan to realize one, as we can guide you to the right investment opportunities with professionals (legal and accounting) who are well versed in the rules regarding OZ. Alternatively, if you are a commercial real estate owner with a project in an QOZ, we can help you with debt and equity to realize your develop- ment goals. Kathy Anderson is found- ing partner of Progress Capital.
cent i ve f or investment in Qualified Opportunity Zones (QOZ). This may be t h e s i n g l e most signifi- cant wealth building op-
An investment in an Opportunity Zone Property not only provides tax benefits, but if the investment is made prudently with a sound business and/or development partner, it can prove to be a diversified wealth building tool.
Kathy Anderson
portunity for anyone realiz- ing capital gains from the sale of real estate, stocks, bonds or even a business . Perhaps the equivalent of the 1031 exchange rules on ste- roids, it offers not only a tax deferral on the capital gain, but also a tax reduction and permanent tax exemption on the new investment. What qualifies as an OZ Investment and what are they intended for? Under the Tax Act, each state designates a quarter of its eligible low-income com- munities as an OZ. Thus, encouraging investments to be used to start businesses, develop abandoned properties or provide low-income housing in distressed communities. Under the program, taxpayers can invest their capital gains into a third-party Qualified Opportunity Fund or a self- directed Fund within 180 days of recognizing the capital gain, thereby deferring the tax on the capital gain to December 31, 2026. The longer the funds stay invested, the larger the tax savings. This tax incentive is intended to help “areas in need of redevelopment” attract capital. 1031 Exchange vs Qualified Opportunity Fund The major difference be- tween an OZ Investment and a 1031 Exchange is that the OZ program is not limited to real estate. However, if you have sold real estate, you have the option of deferring taxes via a 1031 Exchange or an OZ Investment. After selling a real estate invest- ment property, OZ investors roll only their capital gain into an OZ investment and have the flexibility to consider other investment options with the remaining proceeds. For example, if a real estate investor sells a building for $1 Million, generating a capital gain of $250,000, they can reinvest the $250,000 into an OZ investment, not the
with a sound business and/ or development partner, it can prove to be a diversified
wealth building tool . Progress Capital is work- ing with clients who own
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