Opportunity Zones Office Hours – November 2024

Join Jimmy Atkinson at OpportunityZones.com the first Monday of every month at 3:00 PM Eastern Time, to get your Opportunity Zones questions answered live.

On this month’s episode, Jimmy answered questions about the OZ map, deferred capital gains tax due date, setting up OZ funds in a tax-free state, and favorite asset classes.

Featured OZ Questions On This Episode

  • Can the tax bill for deferred capital gains invested into a QOF be paid in advance of the 2026 tax year?
  • How can small OZ funds exchange information with other similar funds?
  • Would it make sense to set up a Qualified Opportunity Zone Fund (QOF) in a tax-free state?
  • Can an OZ fund or OZ business operations lease office space as long as it is in an OZ?
  • Do I need to have a property closed on with an address in an OZ to form a QOF and QOZB?
  • What asset class is most promising for OZ investments?
  • What is the last possible date to invest into a QOF?

Featured On This Episode

About The Opportunity Zones Podcast

Hosted by OpportunityDb founder Jimmy Atkinson, The Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in the Opportunity Zones industry.

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Show Transcript

We are live! Welcome to the November 2024 episode of Opportunity Zones Office Hours. I’m Jimmy Atkinson, founder of Opportunity Zones dot com. I’m going to be taking your questions live in just a minute.

So if you have any questions about Opportunity Zones, you can submit them by using the chat. But before we begin. Are you looking to take your opportunities on strategy to the next level, but maybe you’re not sure where to go? OZ Insiders offers comprehensive premium content and networking to help you get started.

Our monthly masterclass meetings cover a wide range of topics from fundamentals to advanced, ensuring you have what you need to thrive. As a member of Uzi Insiders, you’ll get access to our exclusive online community, monthly group coaching, and monthly masterclass meetings, providing you with valuable Opportunity Zone networking opportunities and guidance from the best Opportunity Zone professionals in the industry. Whether you’re a beginner or you’re looking to get to the next level, we have what you need at OZ Insiders. Visit ozinsiders.com to learn more. That’s ozinsiders.com.

Welcome again to the November 2024 edition of OZ Office Hours. It is Monday, November 4th, 2024… Election Day Eve. And you can join me the first Monday of every month at three p. m. Eastern time to get your OZ questions answered live.

So whatever questions you have about Opportunity Zones, I’m here to answer them for the next thirty or so minutes. I like to cap it at about forty five minutes, although I think we went past fifty minutes last month. I’m going to try to stick to the time this time around November twenty twenty four. Just type your questions into the chat, whether you’re on YouTube or on LinkedIn.

You can submit your questions through the live chat. Coming up, by the way, in just another day here, really, is my big trip to Washington, D. C. for the Novigradic OZ Summit at the Fairmont Hotel in Washington, D.

C. That’s taking place this Wednesday, November sixth. I’m actually heading into town tomorrow afternoon. I’m hosting.

. . a big dinner for our oz insiders members that’s another benefit of oz insiders is invitations to our exclusive in-person events and you know we have our our last one of the year coming up at a restaurant right around the corner from the hotel where the novigradic conference will be taking place the next day so if you’re in washington dc now where you’re heading there for the conference if you’re planning on going to the conference uh let me know send me an email or feel free to type it into the chat. Just say, hey, I’m going, or I’m going to be there.

It’d be great to hear from anybody who is planning on being there. There’s going to be about, I think the last time I checked, we had a headcount of nineteen people coming to the dinner tomorrow night. I might still squeeze in one or two more. So let me know if you’re planning to attend the Novogradac OZ Summit.

Wednesday in Washington, D. C. And of course, we have one other event coming up. My big event, our flagship event at OpportunityZones.com, OZ Pitch Day is coming up on November fourteenth. You can learn more and register for that event by heading to OpportunityZones.com. We’re gonna get to the questions in a moment here.

So start submitting them through the chat. I see a couple already. Andy Higgins is here. He says, what’s up everybody?

And then we’ll get to his question in a minute here. But one of the most frequent questions I get is, hey, Jimmy, I checked out the map. of the opportunity zones. We’ve got a project site that’s really close to an opportunity zone.

It’s just on the other side of the county or it’s literally across the street or it’s just on the other side of the highway. Can I get this zone extended or can I make my area into an opportunity zone? So how do I go about doing that? And unfortunately, it’s not possible to change the opportunity zone map.

And I’ll go to the map right now because another big question I get asked. probably the most common question I get asked is, hey, where can I find the map of Opportunity Zones? Well, we have a map on our website. Just go to opportunityzones.com/map or go to opportunityzones.com and click on Map in the top nav here. It’ll take you to this page, our Opportunity Zone map. And I’ll pick on Fort Worth, Texas right now.

Let me see if I can zoom into Fort Worth because that’s where I am right now is in my home office in Fort Worth. And By the way, this is a totally made-up example. Nobody’s actually coming to me with this exact problem. But let’s say this opportunity zone here that kind of straddles the Chisholm Trail Parkway.

. . Brand new, beautiful toll road heading south of Fort Worth. I drive on it pretty frequently.

Let’s say I’m developing right on this lake right here, let’s say. I don’t even know what this is, by the way. I haven’t even taken a look at this. This is just a totally ridiculous example.

But let’s say I’m developing on this lake right here. And you can see it falls just outside the Opportunity Zone. So I’ll sometimes get somebody ask me, hey, can I get that thing extended over a little bit? And the answer, again, is no.

This is the map. This map got set in stone, for better or worse, in twenty eighteen, and you cannot extend a zone or or designate a new zone. Now, what you can do is if you have just one project and it’s not in a zone, you’re kind of out of luck. If you have a portfolio of projects, a pipeline of projects, and a lot of them are in opportunity zones and you need to squeeze one more in that isn’t in an opportunity zone, you could do that potentially.

So a qualified opportunity fund remains in compliance if ninety percent of its assets are good assets. If they if the capital is deployed into qualified opportunities on business, a qualified opportunity zone property. So there is a way where. Let’s say you have ten projects and they’re all of equal value.

Nine of them could be in a zone and that last one could actually fall outside the zone but still be funded through a qualified opportunity fund. It would technically be in compliance and be totally okay. Take whatever I say with a grain of salt, by the way. That’s conceptually how it works, but you wanna check with your CPA to get professional guidance on that.

With that said, let’s see what else I have here. Oh yeah, one more new feature for today’s episode. I’m gonna start asking you a question. And you feel free to chime in in the chat.

Well, I already asked you one. I asked you, are you going to the Novigrad-Ikosi Summit or are you in DC or heading to DC? I’d love to see from you, see you or hear from you. That’s question number one.

But the big question, The question of the day I want to ask everybody is, what is your single biggest opportunity zone challenge? Let me know and I’ll see if I can address it. But with that, we will go to the questions. And first question is from Andy Higgins.

He says, my question, who will win the Ohio Senate race tomorrow? Since you already predicted Trump will win the presidency. And I did predict that, by the way. I stated my.

. . My final odds of a Trump victory in the election taking place tomorrow, it was about sixty percent, actually a little bit lower than what the betting markets had at the time as of a week ago. Although at the moment, it looks like Trump’s trending a little bit below sixty percent chance.

Andy, I don’t know. I haven’t been following the Ohio Senate race and you would have to ask Shay Hawkins that question. But if anybody is following the Ohio Senate race and wants to chime in there, please do so. That would be great.

I did have a few questions that were emailed into me earlier this week, actually just this morning, because I sent that big email out. So I’m going to go to those. And if anybody has any live questions that they’d like to get addressed, feel free to chime in, use the LinkedIn chat or use the YouTube chat to submit your question. But first, Let’s go to this question from Bruce.

Bruce emailed me this question early this morning. Thanks, Bruce, for reaching out. He says, and I edited this one down a little bit because I had a character limit, but he said, hey, we may be getting a new administration, is how he led the email, to which I would say that’s not true. It’s not we may be getting a new administration.

We’re definitely getting a new administration because Biden is out and it’s either going to be Harris or Trump, unless Bruce knows something, I don’t. I don’t think Biden’s in it again. So there will be a new administration is the way I look at it. Although I take his point, the party may or may not change.

In light of the fact that we are getting a new administration and that capital gain rates might go up, can we pay our taxes on the capital gains that we deferred for our OZ fund business in advance? This is a great question. And the reason why this is interesting is this is the same question I was getting four years ago also. Because four years ago on the eve of the election, we were looking at four more years of President Trump in a low tax rate environment, business friendly environment.

Or is Biden going to come in and Biden has proposed possibly doing away with ten thirty ones, possibly raising the capital gains tax rate. He hasn’t gone away with ten thirty ones, by the way, which I know isn’t part of the question, but he also hasn’t increased capital gains tax rate. If you had asked me Four years ago, after the election, after we knew that Biden had won, what the capital gains tax rate would be here right now in twenty twenty four. I would have said not exactly sure, but I’ll I’ll bet you almost anything it’s going to be higher than what it is today in twenty twenty.

And actually it hasn’t been right. So that’s been a bit of good news is that the capital gains tax rate has not gone up. um now if harris wins the election I think there’s certainly a very good chance that that capital gains tax rate does go up when it goes up I don’t know will it go up by december thirty first twenty twenty six will it take effect in the twenty twenty six tax year the deferral year for opportunity zones I don’t know, but it might. And it’s a great question that you ask here, Bruce.

The answer, first of all, I’m going to say I’m not a hundred percent sure of this answer, but I’m pretty sure that the answer is no, because it’s, it’s laid out pretty clearly in the statute that when you make an opportunity zone investment, your capital gain that you defer into an Opportunity Zone Fund is deferred until December, thirty one, twenty twenty six. I don’t know if there’s any sort of mechanism to pay it early. To the best of my knowledge, you have to realize it on December thirty one, twenty twenty six, and it will get taxed at the twenty twenty six tax rate. I don’t know what that’s going to be.

And there is a good likelihood I would have said almost four years ago, there was a very strong likelihood. Now I’ll say there’s a very good likelihood that if Harris wins, that rate could go up. And that would be bad news for OZ investors. The good news is.

. . It’s also good news for us, the investors, if you think about it, because at the end of the day, the opportunity zone tax incentive is a capital gain tax incentive. And you’re going to get a big hit on your twenty twenty six tax bill when you pay it in April of twenty twenty seven.

If the rates go up in particular, but if the rates do go up, think about the ten year benefit you’re getting. If you invested in an opportunity zone and say twenty one or twenty two, When you go to exit that OZ investment, ten years down the road, twenty thirty two, twenty thirty three, twenty thirty four. You know, what are capital gains rates going to look like then? I don’t know.

I don’t depends who’s in the White House, depends who controls the balance of power in Congress. But if we were expecting a capital gains rate to go up. by twenty six and maybe over the long term, maybe up even more up by the twenty thirties. It makes OZ investing all that much more valuable.

Just something to think about. Anyways, thanks for the question there, Bruce. Again, if you have any comments or questions, feel free to submit them in the chat. I’m answering your questions live for about thirty to forty five minutes here.

Roger just chimed in with a live comment. He said Trump helped to create the Opportunity Zone tax benefits. That he did, Roger. Although I would say that the idea of Opportunity Zones and its initial formation and initial legislation actually predates President Trump.

But President Trump was the one who signed Opportunity Zones into law, and it was his White House that administered the program at inception. So it is labeled the Trump program for that reason. Trump takes a lot of credit for Opportunity Zones, as he should. So let’s see this question here from Daniel.

Daniel’s next here on my list. He says, ours is a small OZ fund under one million dollars. organized by a few local high net worth individuals to finance two projects in Delaware. Daniel, first of all, congratulations.

That sounds awesome. I’m glad you’re using the OZ tax incentive to help fund these two projects. How can we exchange information with other small OZ funds? I love this question.

Daniel, I’ve got a couple areas of suggestion for you. It’s really great to travel. to in-person meetups, in-person events. There’s a big one coming up in Washington, D.

C. later this week. It might be a little bit tight for you depending on where you are. You say your projects are in Delaware, so if you’re in Delaware, you’re actually pretty close.

I would actually urge you to get on up to Washington, D. C. later this week, Wednesday, November just looking at the calendar over there, for the Novigradic Opportunity Zone Summit. There’s gonna be probably about a hundred people there, I would have to guess, and a lot of them operators in the space.

I don’t think there’s typically a lot of investors there. It’s mostly other opportunities and professionals, fund managers, project sponsors, accountants, attorneys. It’s just a really great room to mix and mingle with a lot of people doing a lot of the same stuff in Opportunity Zones. And then I would also encourage you to check out my mastermind group, OZ Insiders.

We do have a number of small OZ fund sponsors who are members of our group. And we get together in person also for in-person meetups. We’re having dinner Those of us who are coming to Washington DC tomorrow night, we have a dinner planned in DC tomorrow night. And then we meet once a month via Zoom for live group coaching and masterclass calls.

So you can learn more about that at ozinsiders.com. Daniel, thanks for the note there. Thanks for the question.

Let me see here. I’ve got a question here from Andrew. Let me get to Andrew’s question. Happy Monday, Jimmy and Andy.

Um, happy Monday to you, Andrew. And he also mentioned that he praised that Trump wins. My question is two part, but linked. So I’ll get to part one here.

Part one, would it make sense to set up a qualified opportunity zone fund in a tax free state? Good question. Question number two, under the current QOZ regulations, can your OZ fund or OZ business operations lease office space as long as in QOZs? Okay, great questions.

Question number one, This deals with the topic of nexus. And again, I’ll just remind everybody, I’m not a CPA, I’m not an attorney. So consult with a tax attorney or your CPA to get advice on this particular situation here, Andrew. But what Nexus really boils down to is which states have the authority or the claim to be able to tax you.

So if you have a project in California, but you set up your Qualified Opportunity Zone Fund in Texas because Texas is a tax-free state, that doesn’t really work. Because California is still going to say, wait, your project’s in California. You owe us money. You have Nexus here in California.

That makes sense, right? I would say if you have a project in Texas, you certainly don’t want to set it up in a state that charges taxes. Your OZ fund, I wouldn’t recommend setting up in New York or in California, because then you do you would have tech, you would have you potentially have Nexus in those high tax states. And that wouldn’t make sense.

A lot of people do set up their OZ funds in Delaware or just their state where the project is located. I mean, I would say certainly it makes sense, but it might not it might not really get you around the issue if the project itself has nexus in a state that has state taxes or that isn’t conforming with the Opportunity Zone statute and regulations. So consult with your tax advisor for more advice on that. The second part of your question, under the current OZ regs, can your OZ fund or OZ business operations lease space?

Yeah, so you can lease. There’s no reason why, There’s no requirement that you have to own the building that you’re operating out of. If you are an OZ business, you can certainly be a business that just leases space as long as it’s in an opportunity zone. And the bulk of your operations are in an opportunity zone and your headcount of your employees is.

. . works most of their hours in an Opportunity Zone location, it’s fine if you lease. Good question there.

Let’s move on to the next one here. This one’s from John, and this is a big two-parter as well. John says, on four, fifteen, twenty-seven, when all the previous long-term capital gains taxes are due, by the way, short-term also, you can defer short-term capital gains into an Opportunity Zone as well. But anyways, when all the deferred gains taxes are due to the IRS and states for those deferred taxes, will the taxes be due to the state you live in now or the state you lived in at the time of the original gain?

If it’s to the current state you live in, many might be moving to Nevada, Texas, or Florida in has to have brought this up as we close in on that date. I have heard this question numerous times. I have not yet seen a good answer to this question, John. I don’t know the answer to this question.

I don’t think there’s a bright line test in the regulations or in the statute about opportunity zones. I think it kind of depends on what your CPA says. And different CPAs may interpret this question a little bit differently. I don’t know the answer.

I do know that it has been brought up quite a bit. And certainly, if you’re talking about a gain of a hundred thousand dollars, maybe it’s not worthwhile to move from California to Nevada. But if you’re talking about a gain of a few million dollars and you might owe a million dollars or more in taxes, maybe you do move. Maybe that is worth moving to Nevada from California for that one year.

But I think it depends on a lot of facts and circumstances. And I think you would need to consult a tax attorney or a CPA for further guidance on that because I don’t have the answer to that question. I don’t know if there is a clear black and white answer to that, but it is a great question, John. And I have gotten a lot By the way, are you a tax attorney or a CPA?

Anybody out there, if you know the answer to that question, please chime in because I’ve heard this question a lot and I don’t know the answer. And John, I’m going to go to the Novogradac Summit in Washington, D. C. with a hundred other Opportunity Zone professionals later this week.

And I will ask that question and see if I can get to the bottom of that. That’s a really good one. I’m going to flag that to see if we can get that answered a little bit later because I really like that one quite a bit. Nick asks, is there a substantial improvement requirement for a tenant slash QOZB who is leasing from a non-QOZB landlord?

What am I doing? Let’s go full screen here. Sorry, I was stuck on my computer monitor for the last ten minutes there. Substantial improvement requirement for a tenant QOZB who is leasing from a non-QOZB landlord.

No, not necessarily. So the substantial improvement requirement really refers to real estate. So I guess I have a follow up question for you, Nick. Maybe you can chime in.

What type of QOZB are you referring to here? Is it just an operating business? And are you moving an existing operating business from outside of a zone into the zone? Or does the business already exist in the zone, in which case you would need to substantially improve the business by buying more equipment, by adding more desks, by adding more computers?

So I would say yes and no. If you’re just leasing, you don’t need to improve the building because the building is not your asset. It’s the business that’s the asset that needs to be either new or improved. Good question there, Nick.

And feel free to chime in if you have any follow-up. on that. OK, let’s go to Javid’s question here. He asks, hi, Jimmy.

I am new to OZ. Welcome. must investors realize the deferred capital gains after seven years? What happens to the original capital gains if kept in an OZ fund beyond ten years?

So the deferred capital gains, by the way, there was a seven-year hold time at one point in time. If you were an early investor in OZs, if you got into an OZ fund in twenty eighteen or in twenty nineteen, there was a seven year hold provision. If you achieved a seven year hold prior to the end of twenty twenty six, you get a fifteen percent basis step up on that initial on your opportunities and investment and your initial gain amount would essentially be reduced by fifteen percent for the purposes of paying that tax liability. But there’s no seven year deferred thing now.

It’s simply everybody, regardless of when you invest in an Opportunity Zone fund, your deferral date is December, thirty one, twenty twenty six. So even if you invest today or if you invest on December thirtieth of twenty twenty six, you’re deferring that gain until December thirty one, twenty twenty six. So your question is, what happens to the original gain? if kept in the fund beyond ten years.

Okay, so, well, let’s go to the whiteboard. I haven’t gone to the whiteboard yet. Let’s see. Where’s my whiteboard?

There it is. We figured it out. Okay, so, by the way, if you come to the OZ Summit in Washington, D. C.

this week, I’ve got a free pen for you, OpportunityZones.com pen. These are hot off the presses, just arrived literally minutes ago to my office here. So, So the question is, what happens to the original gain?

So you trigger a capital gain up here, and you have a hundred and eighty days to put that money into a Qualified Opportunity Fund, okay? This Qualified Opportunity Fund stays invested in Qualified Opportunity Zone property, which can include Qualified Opportunity Zone businesses, right? For ten years. So ten years go by.

Year one, two, three, four, five, six, seven, eight, nine, and ten, right? So on year ten, is when some sort of transaction could take place. It doesn’t have to happen in year ten, by the way. You actually have until the year twenty forty.

Somebody double check me on that. It’s either twenty seven or it’s either forty seven or twenty eight. But in in this year, that’s the last year you have to achieve the full benefit of opportunities and investing. Either a transaction needs to take place before the end of that year or.

the asset value needs to be marked to fair market value. And it’s at that point that you can no longer keep kicking the can down the road. By the way, this is not written in the statute. This is a regulatory date and the IRS can change this date basically at any time.

So if twenty forty six rolls around, maybe they maybe they rewrite that part of the regs and kick the can down the road a little bit more. It’s a long way off. So what happens to the original gains? Well, the original gain is this right here.

I’m going to get a different color here. This is your original gain right here. I’m going to call this OG for original gain. That pen’s not working.

We’ll go to the green one. So this is your OG right here, your original gain. This is deferred until No matter what, no matter when it gets invested and no matter what happens here, this gain is deferred till this date right here. So you owe taxes on it in April of, of, uh, twenty, twenty-seven essentially.

Okay. That’s when taxes are due on that original gain amount. Okay. So what happens to the original gains that kept in the fund beyond ten years?

Well, the actual capital is in this qualified opportunity fund, right? I’ll just mark it with a little circle here. This is where your capital is. So this is going into the underlying assets.

And hopefully at some point it starts spitting off cash distributions back to the investor. And then at some point, there’s a sale or a transaction or you sell your shares in the qf and hopefully it’s you’ve reached this ten year hold right at which point in time this is what mechanically happens to to your to to all of the money you get in the transaction is that the fair market value or I’m sorry the basis in the fund, your basis in the fund gets marked up to fair market value at time of disposition, which is French for there’s zero capital gain and therefore you would owe no capital gains, taxes, on that investment. Again, you have to achieve that ten-year hold. A lot of moving parts there.

I hope that kind of explained it a little bit. Let’s go back to the questions here. I’m going to get to my next one here. Brian and Megan.

And this is another two-parter. So stick with me here for a second, everybody. Love these questions, by the way. Keep them coming.

If you have any questions, feel free to type them in the chat, whether you’re on YouTube or LinkedIn. Love to hear from you. OK. Brian and Megan are on YouTube here.

And their question is, do I need to have a property closed on with an address in an OZ to form a QOF and QOZB? No, no, you don’t. You don’t need anything to form a QOF or a QOZB. All you need is the LLC formation, essentially.

So if you know how to form an LLC, that’s it. And then you need to file the taxes for that QOF And when you file the taxes for that QOF, you need to file form eight nine ninety six. And then you also need to form a QOZB and file taxes for that. But that one needs no.

. . The QOZB doesn’t get any special tax return document attached to it. In fact, please don’t attach form eight nine ninety six to your QOZB because that.

. . That caused a lot of problems in twenty eighteen and twenty nineteen and twenty twenty the first few years before everybody figured out how to do this. Anyway, let me get to the next very question.

Is there a workaround to form these if you haven’t? No. So you don’t you don’t need to. You don’t need to.

I mean, there’s there’s funds that get created. I would say go ahead. If you if you trigger a big capital gain, go ahead and create the QOF, drop that money into the QOF. and then you can get the property later.

You don’t have to have it closed. Okay, part two, what address would I use on the fund and business? What are the best states to form these funds? And so a similar question we got earlier.

Delaware is very common. I think Nevada is becoming. . .

more common uh I always just like doing it nice I wouldn’t say always but I you know you might just want to consider your home state the state that you’re domiciled in the state where the project is going to be located and I think those are probably the states that make the most amount of sense um talk to your tax advisor um or your your tax attorney or your your formation attorney, your business attorney to get suggestions on which state to file in. And then what address would you use? I like using the address of the registered agent service that I end up hiring. So when you go to create an LLC, you need a registered agent, just put that address on there.

I mean, it’s pretty simple. It’s something you can do I’m not necessarily recommending you use LegalZoom, but you could do it in a few minutes on LegalZoom if you had to. But especially if you’re going to be doing this as a QOF, I might not use LegalZoom. I’d hire a competent, experienced OZ attorney to help you with these.

And we have a list of opportunities and attorneys that we like a lot on our website at opportunityzones.com slash advisors. No, I’m sorry, slash providers. I’m pulling that up on the screen.

right now so let me get that one it’s this one here here we go so recommend oz service providers this is a it’s a free page that we offer opportunityzones.com/providers … Um, here’s our five favorite OZ attorneys and they’re all members of our OZ insiders, um, mastermind group as well. Andrew Daup, Connie Rathbone, Jerry Rison, Brett Siglin, and Ashley Tyson. That’s Mr.

Ashley Tyson, by the way, don’t get that twisted. Um, so that’s, that, that, that’s my recommended list. Great question there, Brian and Megan appreciate it. And, uh, let me know if you need any other assistance with that.

Um, Andrew, who had asked about, would it make sense to set up in a tax-free state? And are you allowed to lease? He chimes in and says, thank you, good sir. So thanks, Andrew.

Glad I was able to answer your question there. Let’s see. Andy Hagan, sweet pen Jimmy. Thanks, Andy.

Okay, Andrew’s got another question for us. We’re at thirty minutes right now, so I think I’ll just go for a few more minutes before I wrap up. Really appreciate all of the engagement today, all the questions. Keep them coming.

If I don’t get to your question today, I can try to address it via email. or I might end up holding it until next month. Andrew asks, if you have a low income housing project built and stabilized before April, twenty twenty seven, can you use low income housing tax credits or LIHTC to deduct from taxes owed on that original gain? I don’t know the answer to that one, Andrew.

I’m not very well versed in LIHTC. I do know that it is possible and that a lot of Opportunity Zone funds have layered in LIHTC, excuse me, LIHTC money, low-income housing tax credit money within their Opportunity Zone deal, particularly if they do have an affordable housing component. And it’s great to do, right? But I don’t know the answer to that question.

Can you use LIHTC to deduct from taxes owed on original gain? I don’t know the answer to that one, Andrew, but it’s a great question. It’s worth reaching out to one of those attorneys that I just. .

. uh, sent you to actually, you know, who I would reach out to as a CPA group. Um, there’s two CPA groups that I really like a lot. One of them is Novogradac and company.

I’m, I’m partners with them on their, uh, or I am a media partner of theirs full disclosure, um, for their upcoming Novogradac Uzi summit. Um, So I do like passing a lot of potential clients to them, Novigradic, that is. And they specialize in community development tax credits, like new markets tax credits, like historic tax credits, and like low income housing tax credits. I’m sure they can point you in the right direction.

And then one other accounting firm that I really like a lot is HCVT. And my guy over there is Blake Christian. He’s a member of our OZ Insiders mastermind group as well. And he has deep expertise in opportunity zones and structuring these types of funds and deals.

So, yeah. Andrew, feel free to reach out directly or send me an email or shoot me another comment if you’d like me to help put you in touch with somebody who has the answer to that question. Let’s see. We’ve got a couple more questions that I had queued up in the email here that I got via email.

So I’m going to go to these last couple before I cut everybody loose for the day. But if you’re enjoying today’s episode, if you like what we got going on here, give us a thumbs up on YouTube or on LinkedIn. Just hit that thumbs up button. It’ll help other people find our show and the advice that we try to distribute to other Opportunity Zone operators all over the country.

Um, the question from Dell came in via email. I’ve got it loaded up here. He says, we’ve been looking at QOZ for a while post sale of a family business, which first of all is great, right? Cause you can, uh, oftentimes if you’re a real estate investor, you’re kind of stuck between, do I do a ten thirty one or do I do an OZ?

If you sell a business that you can’t do a ten thirty one, ten thirty one is only for real estate. OZs is the only thing really that you can potentially do that’s anything anywhere similar to a a ten thirty one where you can defer and then essentially eliminate capital gains at some point down the road. So his question is, what asset class lights your fire? Self storage, multifamily, single family.

You name it. Okay, so what do I like? First of all, this is not investment advice, okay? I’m not your investment advisor.

Please consult with your investment advisor before making any investment decisions. Standard disclaimer there. I really like, and particularly using the lens that is Opportunity Zones, I really like residential. I like it for a couple of reasons.

One, it’s fairly stable over the long term. Two, the supply demand is incredibly imbalanced right now. We have, depending on who you ask, a three or a four or five million unit housing shortage in this country. There’s always demand for a roof over one’s head.

You know, when there’s a black swan event or another pandemic, you know, certain asset classes can kind of tumble, right? Or fall out of favor. Hotel and office suffered terribly from the pandemic, right? Hotels coming back in a big way.

So in the short term, I actually like hotel quite a bit. Office, man, I don’t know. I would not want to have purchased an office property in twenty nineteen or twenty twenty. And a lot of people who did, by the way, and a lot of those the operators who did are finding creative ways to convert them into multifamily now.

But long term. I really like residential. I like it for. .

. And I don’t know if I’m necessarily picky about which specific subtype of residential. I think you can make a case for any of them. Student housing, senior living, single family rentals or BTR built to rent, multifamily.

There’s a place, it kind of depends. . . which geography you’re targeting, where you are, which hyperlocal type of asset, type of subsector within residential may perform best.

But overall, I’m just going to say residential for all the reasons I just gave. But also, on top of that, if we’re looking at Opportunity Zones as a tax policy that’s supposed to impart some sort of public good You know, some of these asset classes, you kind of scratch your head at and wonder, well, how much good is this really doing? Or how much good is that really doing? But if we’re using Opportunity Zone tax dollars to, or a tax incentive, I should say, to fund the creation of more housing in this country, I really think that that is something that’s very defensible, something that folks on both sides of the aisle can really get behind.

I think that’s really one of the main reasons why Opportunity Zones were so strongly supported in bipartisan fashion from folks on both sides of the aisle early on was that it was going to, yes, catalyze business development, catalyze economic development, revive some of these low-income census tracts all across the country, but also housing. I mean, and Opportunity Zones have done an incredible job putting a huge dent in that three or four or five million unit shortage. Novogradac had some data from a couple months back. Hundreds of thousands of units have been funded by Opportunity Zone funds just in the first few years of the program.

So big fan of residential. Hope that’s a suitable answer for everybody there. Let’s see. I’m going to get to this one last question here from Brian.

And I’m going to go to the whiteboard one more time, and then we’re going to cut everybody loose. Thanks again to everybody for participating today. But question from Brian, get out my trusty blue one here. Is it true that the last qualified investment to opportunity funds valid on the last day of twenty twenty six?

So let me let me tell you a little bit about what’s going on here. I’m going to do a little calendar here. Okay. And let’s say this last day here is thirty one.

Okay. This is twenty twenty six December. Okay. So this is the deferral date.

And in the statute, it is written that this is the last day that you can trigger a gain for investment into a qualified opportunity fund. So what does that mean? Well, that means, let’s just write this out a little bigger here. December, thirty-one, twenty-twenty-six is the last day to trigger a gain.

But is it the last day to make an investment in Opportunity Zone Fund? Technically, no, because remember, Again, you have an, you have a hundred and eighty days to roll that gain over into a qualified opportunity fund. So let’s add a hundred and eighty there. And you know what you get?

I had to Google this earlier, but you get June twenty ninth. Twenty twenty seven. Little caveat here. June one hundred June twenty ninth.

Twenty twenty seven is the one hundred and eighty day after December thirty one. So I don’t I might say just to be on the safe side, get it in by June twenty eight. Gives you an extra day there to make sure you’re on the safe side. So suffice it to say, late June of twenty twenty seven is the last day that you have to roll over a twenty twenty six gain into an opportunity zone fund.

Now, by the way, That is if that gain is triggered on exactly this date, December, thirty one, twenty twenty six. If you trigger it earlier, if you trigger it on December, let’s say you trigger it on a week earlier on the twenty fifth Christmas Day, December twenty twenty six. Well, then just subtract seven from here and you’ve got twenty one. So June twenty one would be your your day.

Now, there’s one other. scenario, by the way, that can buy you even more time. And that is if you recognize a gain on a schedule K one. So let me explain to you how this could potentially work.

You trigger through a partnership that you are a member of a gain at any point in time during twenty twenty six. It can be on January one. It could be on June thirtieth. It can be on December thirty first of twenty twenty six.

That gain on the partnership gets reported to you on a schedule K one. Twenty twenty six schedule K one. When do you get your K ones typically? Usually I think they’re supposed to be sent by February.

of the following year, so, the IRS has said, in this event where you trigger a gain through a partnership that gets reported to you on a schedule K-one, Well, if you triggered a gain on January first, let’s say of twenty twenty six, but you don’t even find out about it until February of twenty twenty seven, you’re way through your one hundred eighty day window. The IRS has said, look, for the purposes of Schedule K one gains, you can actually elect to use the due date of the partnership tax return as the start of your one hundred eighty day clock. And typically. For partnerships whose tax year follows a calendar year of January through December, March fifteenth of twenty twenty seven can be the start of your one hundred eighty day clock for any of these gains triggered at any point in time through twenty twenty six.

Now, what happens if you add one hundred eighty days to March fifteenth twenty twenty seven? Well, you get September eleventh of twenty twenty seven. And again, that’s that would be the one hundred and eightieth day. So call it this September tenth if you want to be on the safe side.

OK, so this is kind of the date that I’m using as this is it. This is the final date that anybody could ever possibly invest in an Opportunity Zone fund. taking a new gain from twenty six and rolling it into a QOF. This is the last date that you can do it on.

And this is only available if that gain gets reported to you through a partnership. Schedule K one. That’s it. That’s all I got for the show today.

Again, if you enjoyed today’s episode, really would appreciate if you give us a thumbs up. Thank you for everybody for being here today. It’s going to be a pretty busy next few days for me. I’ve got election day tomorrow.

I’m headed to Washington DC tomorrow. I’ve got my OZ Insiders dinner tomorrow night. I’m going to try to get the answer to your question, John, about what happens if you move from one state to another during that period before, and hopefully I can cover that on the next episode here or shoot me an email. I’ll see if I can get an answer to you via email.

Now, one more time, let’s hear from our sponsor, OZ Insiders. That’s my group. Are you looking to take your OZ strategy to the next level and you don’t know where to go? And did you like this episode today?

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Thank you so much, everybody, again, for watching today. That’s all the time we have. Again, if you enjoyed today’s episode, give me a thumbs up and make sure to subscribe to our YouTube channel.

I’ll be back with another episode soon. Join us Mondays at three p. m. Eastern time on the OpportunityZones.com YouTube channel. Thanks, everybody. Really appreciate it. And I’ll be back soon.