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66 I N D U S T R Y I N S I G H T / C H A R L E S T A S S E L L Whether you call them Opp-Zones, OZones, or OZos, the investment flood is coming to a low-income census tract near you. By now most states have published maps of the various census tracts that have been approved as opportunity zones, and if you aren't involved, you are missing out. Periodically, we hear about some new guru or technique that will revolutionize the real estate investing world. Usually, it's a bunch of hype over one of several underlying themes. However, when Uncle Sam is involved, the incentives can be game-changing. On October 19, the Internal Revenue Service (IRS) released more than 70 pages of regulations on investment zones to develop opportunities for low-income communities. Opportunity zones were initially passed as part of the Tax Cuts and Jobs Act of 2017. e intent was to increase investment in low-income communities that have missed out, often for decades. As Kathy Fettke, CEO of Real Wealth Network, pointed out in a recent Real Estate Journal article, opportunity zones are "…similar to a 1031 Exchange, but with some amazing fringe benefits." THE INS AND OUTS OF OPP-ZONES While digesting the rules, it would be a good idea to find out where those areas are near you and prepare for investments and options for investments there—before the December 31, 2026 deadline. e summary of benefits includes deferred taxes on the investment in an opportunity zone, deferred taxes on income reinvested in opportunity zones, and tax forgiveness on improvements in the value of the building at sale time in opportunity zones—if it is held for 10 years. Studies from the Federal Reserve have shown that Americans were sitting on $6.1 trillion in untapped capital gains at the end of 2017. e option to defer those taxes and reinvest them in opportunity zones until 2026 is one of the goals and benefits of this part of the legislation. With a Qualified Opportunity Zone Fund, which can include partnerships, corporations, and LLCs, there are a variety of static and dynamic methodologies with no required exit until 2047. With these timeframes and sunset windows, it makes for some exciting options for estate planning as well. Key interest is focused on a couple of areas: 1) deferred payment on capital gains taxes, 2) up to 15-point step-down in basis points for capital gains invested for up to eight years, and 3) no tax on the increase in the building if held for 10 years. INVESTING IN THE ZONE Opportunity zones offer real estate investors strong incentives to invest in designated low-income census tracts. Here's why these zones could be the next big thing. 66