{"id":67590,"date":"2025-02-04T09:38:03","date_gmt":"2025-02-04T09:38:03","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/real-estate\/opportunity-zones-ultimate-investors-guide-2020\/"},"modified":"2025-02-04T09:38:03","modified_gmt":"2025-02-04T09:38:03","slug":"opportunity-zones-ultimate-investors-guide-2020","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=67590","title":{"rendered":"Opportunity Zones \u2013 Ultimate Investor\u2019s Guide (2020)"},"content":{"rendered":"


\n<\/p>\n

\n

Opportunity Zones \u2013 Ultimate Investor\u2019s Guide (2020)<\/h2>\n

\u00a0September 02, 2020<\/p>\n

Thanks to President Donald J. Trump, the Congress passed the law creating opportunity zones (OZs) in 2017. The zones encourage investment in blighted communities across the country. The goal is to boost economic growth and create new jobs in the poorest U.S. neighborhoods through the use of available tax benefits. Let\u2019s discover what are opportunity zones, how they work, and how to invest in opportunity zones, including where are the opportunity zones and what are the opportunity zones tax benefits.<\/p>\n

What are Opportunity Zones?<\/h2>\n

OZs are geographic areas corresponding to low-income census tracts that state governors nominate and the Treasury Secretary<\/a> certifies. To qualify as an OZ, either of two conditions must apply:<\/p>\n

1. The median family income must be below 80% of the surrounding areas, or
2. The average poverty rate is at least 20%<\/p>\n

As of now, the OZ program created 8,700 zones in urban and rural areas. Every state and territory has at least one designated OZ. The average poverty rate in these OZs is 29%, depressing real estate markets and the people who live there. In general, OZs had in the decade prior to passage of the enabling legislation suffered with lethargic economic growth and decimated populations.<\/p>\n

Underserved communities should benefit from OZ investments, although certainly there are plenty of opportunities for fraud and corruption.
The pre-pandemic makeup of the designated OZ areas includes:<\/p>\n

\u2022 1.6 million businesses
\u2022 24 million jobs
\u2022 475 solar energy farms
\u2022 127 wind farms
\u2022 479 airports
\u2022 379 institutions of higher learning<\/p>\n

To the extent that capital flows into these opportunity zones marks a chance for improved neighborhoods and enriched investors. Opportunity zone designations will expire on December 31, 2028.<\/p>\n

How Do Opportunity Zones Work?<\/h2>\n

OZs permit investors to invest in businesses operating within its borders and to receive several tax incentives. To reap the tax benefits, the opportunity zone must be qualified. You invest in an OZ through a qualified opportunity fund (QOF)<\/strong>.<\/p>\n

A QOF is an investment vehicle (corporation or partnership) purposed to invest in the assets within an opportunity zone. You or your entity can create your own opportunity zones via a self-certification procedure.<\/p>\n

The first task is to designate which businesses operating within an opportunity zone qualify for inclusion in a QOF. An opportunity zone business (OZB) can qualify if it demonstrates that virtually all of its tangible property resides within a QOZ. Only qualified opportunity zone businesses (QOZBs)<\/strong> and qualified opportunity zone property (QOZP)<\/strong> may participate in a QOF.<\/p>\n

Qualified Opportunity Zone Businesses (QOZBs)<\/h3>\n

For an opportunity zone business to be qualified for inclusion in a QOF, it must earn the majority of its annual gross income form business activities taking place within a QOZ. You can satisfy this QOF 50-Percent of Gross Income Test by meeting any one of the following three safe harbors:<\/p>\n

\u2022 At least 50% of the total hours of services received by the business occurred in a QOZ, or
\u2022 At least 50% of the total amounts that the business paid for services were for services performed in a QOZ, or
\u2022 Necessary business functions and necessary tangible property resided in a QOZ.<\/p>\n

Qualified Opportunity Zone Property (QOZP)<\/h3>\n

To quote the IRS:<\/p>\n

\n

\u201cQOZ property is a QOF\u2019s qualifying ownership interest in a corporation or partnership that operates a QOZ business in a QOZ or certain tangible property of the QOF that is used in a business in the QOZ. To be a qualifying ownership interest in a corporation or partnership, (1) the interest must be acquired after December 31, 2017, solely in exchange for cash; (2) the corporation or partnership must be a QOZ business; and (3) for 90% of the holding period of that interest, the corporation or partnership was a QOZ business.\u201d<\/span><\/p>\n<\/blockquote>\n

You can identify tangible property earning the QOZ business property designation if it meets certain criteria:<\/p>\n

\u2022 A QOZ business or a QOF trade or business uses the business property.
\u2022 You purchase the property no earlier than January 1, 2018.
\u2022 The property has to remain in the QOZ.
\u2022 The property\u2019s original use started with the QOZ business or the QOF, or the property received substantial improvements by the QOF or QOZ business.<\/p>\n

How Assets America\u00ae Can Help<\/h2>\n

Since you must invest previous capital gains in a QOF to earn the rich tax breaks, Assets America\u00ae really can\u2019t help you, that is, unless you need help moving or selling a commercial real estate property.\u00a0 In that case, please call us today at 206-622-3000<\/strong><\/a>.<\/p>\n

Apply For Financing<\/h2>\n