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What are Qualified Opportunity Zones? - YouTube
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what are qualified Opportunity Zones
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with the mystified the following topic
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in this video my name is Chris at house
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set house it is the largest assisted for
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sale by owner and buyer agent Commission
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we've a company in york city established
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2014 qualified Opportunity Zones our
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census tracks in all 50 states all US
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territories and Washington DC that have
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been designated by their respective
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governors as low-income or economically
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distressed areas and thus eligible for
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tax deferred investment through
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qualified opportunities on fronts as
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we'll discuss in the following article
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investors can role unrealized capital
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gains into qualified opportunities own
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funds and defer taxation until the
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investment is sold furthermore there are
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additional tax exemptions on the
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appreciation of the opportunity fund
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investment itself based on a sliding
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scale with benefits increasing as the
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length of the hold period increases what
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is the opportunity zone program the
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opportunity zone program was created by
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the tax cuts and Jobs Act of 2017 and
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allows investors to defer capital gains
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taxes on investments by rolling the
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amount of the gains and to opportunities
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own funds which make long-term
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investments and businesses or real
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estate in designated opportunity zones
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depending on how long the investment and
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the opportunity zone fund is held the
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investor may have part or all of his or
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her potential capital gains from the
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investment be exempted from capital
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gains taxation for the avoidance of
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doubt it is any potential gain on the
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opportunity zone investment that may be
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accepted not the original capital gains
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that have been rolled into the fund the
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original capital gains taxation on the
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proceeds which were rolled into the
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opportunity fund is simply delayed
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versus accepted
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remember that this program was created
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for people with large amounts of
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unrealized capital gains such as large
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paper wealth from startup stock that has
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appreciated significantly in value a lot
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of these Silicon Valley millionaires and
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billionaires are loathe to sell their
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stock and then have to pay capital gains
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tax so this program enables them to
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roll there's games into this program and
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defer that taxation on the gates how the
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tax deferment works if an investor sells
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stock real estate or other property that
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has appreciated in value he or she will
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normally be liable for capital gains tax
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on the appreciation this can be deferred
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by ruling the gains into a qualified
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opportunity fund within a hundred eighty
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days of the sale this way the investor
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is able to get his or her principal back
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and also defer taxation on the
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appreciation furthermore if the
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investment and the qualified opportunity
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fund is held for at least five years
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prior to December 31st 2026 that capital
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gain on the investment can be reduced by
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ten percent if the investment is held
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for at least seven years the gain on the
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investment is reduced by 15% if the
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investment is held for at least ten
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years then the capital gains tax on the
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investment is 100% reduced what our
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opportunities owns opportunities zones
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are designated low-income areas in all
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50 states Washington DC and five US
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territories including American Samoa
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Guam Northern Mariana Islands Puerto
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Rico and the US Virgin Islands
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interesting enough all of Puerto Rico
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has been classified as an opportunity so
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up to twenty five percent of low-income
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neighborhoods which meet the income
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guidelines of the program as well as up
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to five percent of non low income census
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tracts that meet other income and
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geographical requirements in each state
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district or territory can be designated
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as an opportunity zone there are eight
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thousand seven hundred sixty-four
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qualified opportunities zones and areas
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certified as economically distressed
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communities retain their designation for
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ten years governor's had until April
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2018 to nominate census tracts and their
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districts to be designated as
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opportunity zones they had to have the
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following low-income requirements per
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IRS secure 45 d a poverty rate of 20% or
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more or a median family income of at
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most 80% of the statewide median income
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for census tracts and non-urban areas
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furthermore the median family income of
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the track could be no higher than 80% of
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the greater statewide median family
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income or the overall metropolitan
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median income if the census tract is in
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an urban area
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a maximum of 25% of the census tracts in
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each jurisdiction could be nominated if
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they met the criteria an additional 5%
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of census tracts could also qualify if
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they met a different set of income and
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geographical qualifications of a being
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in a census tract that was contiguous
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with a designated opportunity zone and
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be having immediate family income of a
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hundred twenty-five percent or less of
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the immediate family income of the
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adjacent opportunities oh where can I
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find a list of qualified Opportunity
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Zones
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you can find a complete list of
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qualified Opportunity Zones by checking
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out notice 20 18 - 48 and notice 20 19 -
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42 on the IRS website you can find a
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visual representation of all census
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tracts that have been designated as
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qualified Opportunity Zones on the HUD
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website as an interesting side note 57%
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of all census tracts in the United
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States were considered from the
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opportunity zone program the Treasury
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Department had to camp down on this
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enthusiasm by assessing each proposed
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tract and only certifying those that
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fully met the criteria in the end the
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Treasury Department certified about
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eighty eight hundred tracks as
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Opportunity Zones in June 2018
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what are opportunities own funds to
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participate in the program investors
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must invest through qualified
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Opportunity funds which are required to
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invest at least 90 percent of their
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assets in one or more qualified
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Opportunity Zones how do you become a
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qualified Opportunity Fund it's a rather
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informal process to become a qualified
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Opportunity Fund a corporation LLC or
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partnership simply self certifies to the
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IRS by filing form eight nine nine six
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with its federal income tax return they
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return with form eight nine nine six
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must be filed tightly taking extensions
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into account
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qualified Opportunity funds are
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restricted to investing in the following
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partnership interests and businesses
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operating in Opportunity Zones stock
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ownership and businesses conducting most
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or all operations and opportunities owns
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property such as real estate based and
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Opportunity Zones a qualified
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Opportunity Fund is a lot to develop new
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buildings or rehab existing buildings
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however if it is a rehab such as a
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condominium conversion
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the fun has been more in the improvement
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of the doting versus the cost of by the
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original boudic furthermore development
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must be completed within 30 months of
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the purchase it is unclear whether
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pandemics will affect the time limit
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requirements to be eligible
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opportunities own business to qualify
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for the program businesses must earn at
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least 50% of its gross income from
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business activities within a qualified
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opportunity zone for each taxable year
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there are three safe harbor tests that a
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business may use and it's okay for
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business to satisfy just one of the
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following tests the 50% of hours of
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services received or uses tests the
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amounts paid for services tests the
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necessary tangible property and business
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functions test problems with the
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opportunity zone program the opportunity
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zone program has unfortunately been
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subject to abuses as evidenced by the
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fact that many upscale urban areas were
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also designated as opportunity zones
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for example much of downtown
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Indianapolis was designated as an
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opportunity zone while several low
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income economically distressed
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neighborhoods are run downtown or
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ignored in another egregious example a
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super yacht marina in West Palm Beach
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Florida was designated as an
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economically distressed opportunity so
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Congress did not include any reporting
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requirements and the tax cuts and Jobs
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Act of 2017 which meant that
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beneficiaries of the program were not
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required to disclose the value of the
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projects they invested in nor the value
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of the tax breaks they receive making it
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very difficult to assess the merits of
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the program opportunity funds also
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suffer from other issues such as
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governance issues with multiple partners
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and the difficulty of raising enough
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capital with just one owner delay is due
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to the pandemic in April the IRS issued
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notice 2020 - 23 which included relief
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for certain time sensitive actions such
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as the 180 day period in which capital
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gains need to be rolled into a qualified
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opportunity zone fun if the taxpayers
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180 day deadline fell between April 1st
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to July 15 2020 and then the deadline
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was automatically moved up to July 15
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2020 it's anyone's guess what will
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happen after July 15 another topic that
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has yet to be addressed
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by the IRS is the 12-month reinvestment
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rule where a qualified Opportunity Fund
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has 12 months from the date of the sale
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qualified opportunities own assets to
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reinvest the proceeds and to other
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qualified assets typically a federally
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declared disaster will mean that the
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fund will have another 12 months to
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complete the reinvestment but it's
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unclear whether this will apply to Cova
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90 protip qualified investment fund
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investments have a 30 month working
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capital safe harbor which grants
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businesses 30 months to use working
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capital held as cash if the project is
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delayed due to a federally declared
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disaster then the business can have
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another 24 months to use up the working
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capital the quest is will this be enough
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time given the pathetic so there you
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have it
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we hope you found this video helpful if
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you did please hit like or subscribe if
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you have a question for us please leave
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a comment below and of course we do come
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out with content on a timely basis and
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if you're ever buying or selling
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property in the New York metro region
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please shoot us a note we can help you
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save up to 6% on the south side through
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our assisted for sale by owner listing
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services and up to 2% back on the by
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side through our buyer agent commission
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rebates anyway my name is Chris I will
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see you on the next one
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