INTRODUCTION TO QOZs

Providing Accredited Investors Access to CRE Development Capital Real Estate Investments

CRE Development Capital is a real estate development and investment firm focused on mixed use, multi-family, industrial, and storage opportunities worldwide, including Opportunity Zones in the U.S.

WHAT IS AN OPPORTUNITY ZONE?

An Opportunity Zone is an economically-distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment. They are designed to spur economic development, start new businesses, develop abandoned properties, and provide low-income housing.

Opportunity Zones (OZ) – were added to the tax code through the Tax Cuts and Jobs Act (TCJA) on 12/22/2017.

CRE Development Capital Projects
TAX INCENTIVES

Temporary tax deferral

Temporary deferral of tax on capital gains (CG) reinvested in a qualified opportunity fund (QO Fund).

Potential step up

Possible step up in basis of the investment.

Possible permanent tax exclusion

Possible permanent exclusion of tax on CG from growth of QO Fund investment.

Example investment

  • Taxpayer sells CG property (stock or partnership interest) with a basis of $500,000 for $1,000,000, resulting in a CG of $500,000.
  • Within 180 days, taxpayer invests the $500,000 CG into a QO Fund, elects to defer tax on the gain until the earlier of the sale of the investment in QO Fund or December 31, 2026.
  • Taxpayer holds investment in QO Fund at least 5 years, and the basis is stepped up 10% – $50,000 Now the basis is $550,000.
  • On 12/31/2026 Taxpayer pays tax on $450,000 CG, excluding $50,000 from being taxed.
  • After ten years from initial investment, taxpayer sells the investment in QO Fund for $1,700,000.
  • Taxpayer makes election to have basis = Fair Market Value in investment.
  • The entire appreciation on the investment will be excluded from tax (no tax paid on $1,200,000 gain).
DETAILS AND INCENTIVES

Upon a Capital Gains event, there is a 180 day limitation to invest the CGs into a Qualified Opportunity Fund.

Temporary tax deferral

Deferral of tax is limited to the earlier of 1) The sale of investment in QO Fund, or, 2) December 31, 2026.

Potential step up

Basis step up is limited. Need to hold the QO Fund investment for five (5) years for a 10% basis step up.

Possible permanent tax exclusion

Elimination of tax on investment appreciation: Need to hold QO Fund investment for 10 years.

Direct Investment Structure

This is an example of what a typical direct investment structure might look like when investing in a qualified opportunity fund.

SPE Investment Structure

This is an example of what a typical SPE investment structure might look like when investing in a qualified opportunity fund.

OUR OPPORTUNITY ZONE FUNDS

Fairmont Phoenix Hotel and Residences

A luxury hotel / residential property located in the beautiful Warehouse District in Phoenix, Arizona. Features 230 luxury hotel keys and 141 residential units. Learn more->

Las Vegas Multi-Family

A ground up mid-rise multi-family development with approximately 343 luxury apartment units, and ground floor retail space. The location is in the Huntridge Arts District, Las Vegas, Nevada. Learn more->

Want to learn more about the opportunity zone investment process?