Mahal Cartenberg of Warbury Realty put together a panel of experts on Opportunity Zones at the NYC accounting firm of Citrin Cooperman. He invited CPA’s Michael Gershon and Patrick Daly, the tax attorney Mathew Rappaport and Stuart Gelb, a commercial real estate financing expert.

Here are some key take-away’s from this expert panel on Opportunity Zones as highlighted in an article Cartenberg wrote for InmanNews.

 According to the IRS website https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions, a Qualified Opportunity Zone (QOZ) is an economic and job creation tool created in the 2017 Tax Cut and Jobs Act that provides preferential tax benefits to investors. Economically distressed communities may qualify to become QOZs if they have been nominated by the state and then certified by the Department of Treasury.

Investors need to know:

  • QOZs were intended to “unlock the potential of $3T of capital gains for investments in state nominated and federally credentialed low income communities nationwhide.by the US Dept. of Treasury.”
  • Investors are allowed to defer federal capital gains tax if money is invested within 180 QOZs
  • Investors must hold the investment in QOZs for a minimum of 10 years to allow for a permanent exclusion of capital gains derived from a later sale of a QOZ investment. Investors cannot just “sit” on the money…it must be invested in a QOZ.
  • ONLY liquid assets from capital gains invested in QOZ’s will benefit from this program. If it’s not capital gains money, it’s not part of this benefit program.
  • Regulations haven’t yet been finalized but a QOF may be able to use a 1031 exchange during the required 10-year QOZ Fund period as they buy and sell real estate within the QOZ Fund.
  • All improvements in QOZ communities must be done within 2.5 years. Make sure to invest where cities/states are motivated to “improve” within the 2.5 years and stay away from locations where state/city regulations could delay those improvements.
  • Investors must spend an equal amount to the original purchase price to substantially improve the property. The amount relates only to the cost of the building, not both the land and the building.

Cartenberg’s best advice – hook up with a fully versed advisor who know the regulations and know “how to guide a QOZ Fund through this new program.