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Brittany Besler, AAFCPAs
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Hello! My name is Yen Diep. Nice to meet you all. Looking forward to the event as usual with Jay Darby.
Hey Yen! Ashley Tison with ozpros.com here. Couple of questions to pose to the group: what position are folks taking on the 50% income test during COVID where stay at home orders preclude people from going into offices?
Are there any materials for this 50% income tests during COVID for stay at home orders, etc.? What is this related to?
What is this 50% income test stay at home COVID related to, etc.? Any law name, etc. Is this part of the new reg for OZ, etc.?
The 50% income test is one of the tests that a QOZB has to meet, and it can do so by 50% of its total comp being paid to workers who are physically working in a qualified opportunity zone.
Is there any possibility of making the page in larger print or for it to cover the entire computer screen? It's really difficult to read such small print.
Kelly Zack - AAFCPAs Boston
will all these documents be made available after the webinar?
Jay - Can you make that crypto article available?
Not sure about zooming larger the screen but we can make our articles available post-webinar.
Yes, Kelly, I am wondering that also - will these slides be made available?
Hello all - we will make the articles available tomorrow via a link in an email to all registrants.
Yen - That is a big issue that you have identified. The IRS notices have been silent on meeting this 50% test. E.g. if employees have been working from home not in OZ during Covid (but were previously in the office in OZ) what happens? Investors should really document the dates requiring work from home, etc. It is important to discuss with OZ attorney and accountant to dig into your specific issue.
What is the general consensus regarding crypto holdings by a QOZB? Is it NQFP? Or could it be tangible property that could be considered QOZBP?
The link to the crypto article above. Jay made a few edits and his version will be posted on his website in the next day or two.
For taxpayers that do not have a current capital gain, explore family (maybe friends) with appreciated assets who can gift asset to OZ investor. OZ investor gets "tacked" basis equal to donor's tax basis and when sold the OZ investor reports the gain. Works well when parents want to include kids in the OZ investment.
Now, the initial requirements for opportunity zone is for "actual distressed location/real estate." Is this correct if I remember correctly, etc.?
And what qualifies as a "distressed location"?
Yes, as Jay mentioned, among our other work in the Opportunity Zone, we create and believe everyone should own a "captive" Opportunity Zone structure. It should be treated like a Roth IRA where you put in cash (all you can including qualified capital gains through 2027 and loans to your captive) and retain all earnings not needed for tax payments or other liquidity and you undertake refinancings to continue to grow your portfolio and you hold and grow the portfolio until the end of the Opportunity Zone program (2047) and then take a step up in basis of all of your portfolio at that time. AMAZING WEALTH CREATION OPPORTUNITY.
If I am not mistaken based on my attendance a few times on these topics, there are lots of these in blue cities, etc.
Yen, the areas where you can make Opportunity Zone investments or invest in businesses are in about 8,700 census tracts throughout the United States and its Territories. They were designated in 2018 and remain in place throughout the term of the program - to 2047.
We have setup a number of single story QOF for new construction fourplexes.
What did these single story QOFs find advantageous about not having a QOZB?
Not having to file a second tax return.
He also invested in crypto and said in such a short time, he was up over 10% publicly, etc.
He also graduate from HLS.
With all the fees for crypto unless you have a large gain since there's a link to OZ crypto gains that someone posted, how much gain a person really has, etc.
It seems like a very faint consideration to go without a QOZB just to avoid a second tax return given all the flexibility the QOZB provides.
Agreed. I tried to talk them into it because of the 30% non QOZBP possibility, but they were hard core about wanting simplicity...
What about contributing crypto?
I like your beach view scene, Jay. I wonder if covid-19 would affect such a remote place.
And hopefully, no tsunami, etc.
Based on the large size of the Real Estate funds ($250M or more) that are pursuing ground-up development projects in Opp Zones, and which generally build large projects, one might expect that the competition for OZ sites is most frothy for larger sites (at least 1 acre). With regard to Multifamily developments, what sizes of OZ sites are you finding there is the most developer demand for and what sizes of OZ sites are you seeing the least amount of demand for?
Size of the land depends on what is being developed. Frankly you do not need a whole lot of land for an urban commercial development.
There are plenty of office space now in relatively large cities especially blue state cities especially during this coronavirus time, etc.
Better way of phrasing the question:
for a one-off real estate development project, how much additional legal, tax, accounting etc. fees should one expect to incur relative to a non-OZ project if one is self-managing the substantial improvement? thank you
What about in southern states where you don't have to build one of those high cost affordable homes that NYC keeps proposing, etc.? It's livable, but without the extra, not too high, etc.
With regard to Multifamily developments, what sizes of OZ sites, in terms of developable square footage (ZSF), is the most developer demand for and what sizes of OZ sites are you seeing the least amount of demand for?
The higher the building the more maintenance with heat, A/C, etc. We all know that since the higher you go, the more heat or A/C, the maintenance you need. I live on 1st and 3rd floor before just for a 3 apartment house, etc. Let alone these buildings that are so fancy that no one really use for anything except for office, etc. China builds a lot of apartment buildings to live but not one of those $240M flat that Ken Griffin purchased. If there's no demand and no one can afford them, building them are not sustainable with cost maintenance, etc.
If the southern states have communities that would benefit from building a hospital, etc. assuming there are are enough people, etc. since you cannot build a hospital that fewer people use it so who's paying for the maintenance cost, etc.
Again, depends on the development. We have worked on land sized of an acre or two and tens of acres with small 50 unit apartment developments to large mixed used investments.
would one gain in the tax deferral by investing in a zero tax state (e.g. earn short term gain while in NY 8.82% and fed 37% = 45.82%, 458.2k avoided by deferring a $1m gain.. in 2026 if the investment is in WA and tax rates are the same, would you pay $900k gain in WA (zero) and Federal (37%) or would you have to pay back NY 8.82%)
$333k tax in 2026 vs $458.2k?
NY is planning to raise to 14.7% recently, and I am not sure if that also includes city/local/state or just state rate.
I think that includes NYC… but still the same question. If you earn capital gains in a high state/local tax jurisdiction but invest in QOF that invests in a low/zero tax jurisdiction. What states/local jurisdiction do you owe taxes to in 2026. Is it the original state, current state (i.e. the state the OZ property is in), or both.
I have large capital gains in high tax jurisdiction and thought about investing locally but starting to think what if I invested in WA, FL, TX… or another zero income tax state. would I reduce my future tax liability by 900-1500 basis points?
David, it really depends on (I) where you reside, (ii) whether the state you invest in follows the federal Opportunity Zone program and (iii) your mix or ordinary income vs. capital value increase that would drive your decision to invest in a no/low tax state.
In moderation, etc. And if you're allergic to anything, don't drink/eat it. And if it's addictive like smoking, opium, etc. don't do it like I stay from those things, etc.
cannibis testing abs are good to go
100% ordinary/ST gains. Was in NJ, now in NY, could be anywhere in 2026.
I believe marijuana has good medical use for pain but I don't use for recreational use since it's strong for my body. And I don't do usually do those things, etc. like smoking, etc. But you can also get addicted to drugs too so use other therapy like going to an well-trained MD to electrify you your muscles, etc.
There's no med needed anymore, but you may need from time to time or if you get strained muscle, etc. It's called physical therapy, and it works. Yep, you still have to go to the trained MD office, etc. so don't get hurt during this covid-19 for doing physical stuff, etc.
David, if you are likely leave or otherwise not be in a high tax state during your Opportunity Zone investing the last place I would make that investment is in a high tax state.
normally, when I file, capital gains would be sourced from the LLC (located where the property would be)… so if I lived in and earned from a zero income state in 2026, would the normal flow be pay federal and zero state on the deferred gain (i.e. my tax rate on capital gains in 2026)
for 9% or higher on large gain, I would think about moving to another state for a year.
You may take pain pills at first but then go to a well-trained physical therapist, which your doctor can recommend, etc. And insurance usually pays for a certain number of weeks out a year. The sooner you get your muscles treated through non-drug like physical therapy, the better it is. And you don't have to pain pills anymore, which are bad for liver, etc. in the long-term, etc. if you keep taking drugs, etc. We have a lot of tools, etc. in this large/matured/diverse economy with all kinds of real innovations, methods, etc.
we are muted
I'm trying to unmute myself.
I believe I am unmute.
Sorry I have to go. It was a very good webinar.
Thank you for the excellent presentation. Regrets that I can’t join you on the cocktail hour.
I am still in good health and spirit, Jay. Still looking for potential opportunities, etc.
Is Jap whiskey, saka like people drink when they eat sushi?
Where did whiskey come from originally?
Thanks for the Great presentation, I have to run Thanks so much!
I look up on Wikipedia, and it's spelled whisky. It's from the days of Babylonian with Alexander the Great.
I meant Alexandria as the city.
I'm sure small batch production goes back to ancient times. First whiskey distillery was in Northern Ireland (1608).
I am going to sign out too, etc. I will contact Jay if I would like to know more about Ozone, etc. since Jay is the expert. Thanks again for the invitation and great presentation as usual, Jay. I want to raise money to build companies, etc. A lot of people are raising money so easily, invest in all kinds of junk, etc. and still able to do it based on the news, etc. with all kinds of funds, etc. when there are losses, derivative investments, etc. The due diligence process is always interesting. Thanks, again Jay!
I am going to eat, etc. I like to eat before I drink since those chemicals are bad for your organs if you eat/drink on empty stomach, etc. Have a wonderful, safe and healthy year, everyone!
“In addition, the Treasury Department and the IRS appreciate that a bright-line test for ‘‘vacancy’’ would facilitate the ability for local governments to increase capital investment in underused property and increase economic activity in their respective communities. As a result, the final regulations provide that an eligible entity that purchases real property from a local government that the local government holds as the result of an involuntary transfer (including through abandonment, bankruptcy, foreclosure, or receivership) may treat all property composing the real property (including the land and structures thereon) as satisfying the original use requirement of section 1400Z– 2(d)(2)(D)(i)(II).”
Hey…. since t’s break time (I think….) has anyone in this group gained experience with a QOF that is also located in an EB_5 TEA area? I am looking training $500K in QOF but add $2.7 million in non dilutive EB-5 funds, then have successive EB_5raise (about $15 million over 5 years) and avoid Series A/B?
I would take this as property purchased in foreclosure auction would satisfy original use. question is, is that property original use stay as original use qualifying until it is put back into use. So if that foreclosed property is held by a bank or fannie mae, would it be original use if purchased from these entity before “used”
Georges, email me at email@example.com
Need to jump. Great session. Thank you for coordinating Jay!!