Opportunity Zones – The Tax Cut and Jobs Act 2017

In each state the Governors selected what areas would be Opportunity Zones. These areas were vacant land or very blighted and the development would be from the ground up. The OZ was to create incentives to develop these areas. With that in mind the Governor of Puerto Rico determined that the whole island was an Opportunity Zone. The Governor of California determined that part of San Jose– part of Silicon Valley — was an Opportunity Zone. In Pennsylvania the Governor determined area near the University of Pennsylvania was an Opportunity Zone.

Capital gains only qualify for Opportunity Zones. These gains can be real estate capital gains, stock market capital gains, gains from the sale of art, furniture, boats etc.

So we will examine the OZ through a simple example:

A couple buy a house for $500,000. 15 years later they sell the house for 1,500,000. As they are each on the deed each has a $250,000 exclusion from capital gaines taxes. So in this example they would be paying taxes on $500,000. What they would have in their pocket assuming they had no financing was a nice $1 million of cash. The $500,000 can go into an OZ

Financial steps::

When you invest in an Opportunity Zone your taxes on your capital gains are not due until you submit in 2027 your 2026 tax return. As the Opportunity Zones offered by me are multi-property the Sponsors plan to have finished, leased and refinanced in 2026 sufficient property for you to pay from the refinance proceeds your taxes in 2027. No taxes are due from the refinances. As the multiple properties under construction are completed you receive additional refinance monies plus possibly distributions from the Tenants’ rents.

Now to rules of the Opportunity Zone —this is a ten year commitment.

As in order to lease a property you have to build it first, the investor is not going to receive any possible distributions for at least three years approximately.

When you file in 2027 your 2026  tax return you must pay the capital gains taxes you previously deferred.

At the end of 10 years all of your returns from your investment incur no taxes.

You have 180 days from receipt of your capital gain to invest in an Opportunity Zone

The Sponsor of an Opportunity Zone

Has a plan for construction, leasing, distributions and selling the property after 10 years.

Most Sponsors plan to complete a building pre leased and refinance their Construction loan to a permanent during 2026. With the distribution of those non taxed refinance proceeds you have the cash with which to pay the taxes you did not pay in 2023

With a sale  10 years later–

And with the sale – the potential for cash without the IRS!

With all the opportunity zones out there I have chosen to promote two of them. Both Sponsors have deep pockets with a history of integrity, experience and unique capabilities to strive to complete what they start.

The above does not include all possible small print and requirements.

1031 Risk Disclosure
General Disclosure
Testimonials

Our partnership had developed a shopping center in the mid-80s, and in 2002 it was opportune for us to sell. But a straight sale would have meant a tax not only on our gained value, but also on the accrued depreciation — and that would have left next to nothing after taxes. So we knew a 1031 exchange was for us.

Marilee Hill knows the exchange process in detail. And she is constantly in touch with firms offering investment-grade properties specifically structured for exchanges. We ended up with a diversified portfolio, as part-owners of four solid, well-managed income producers: an office park, apartments, a net-leased office building, and another shopping center. And the capital gains tax? Indefinitely deferred.

Jay Silberman

Our tax situation was both complex and difficult. A real professional, truly knowledgeable, was necessary to guide us throught the maze. We are extremely pleased that we met, employed and worked with Marilee Hill. All of our problems were solved, and the results were way beyond our expectations.

G. Raymond and Martha Ellen Bodie
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General Disclosure
Not an offer to buy, nor a solicitation to sell securities. All investing involves risk. Past performance is not indicative of future results. Speak to your finance and/or tax professional prior to investing. Information provided on this website is for educational purposes only, and is not a guarantee of performance. Offerings of the type discussed herein are available only via private placement memorandum, and are limited to accredited investors.

Securities offered through Emerson Equity LLC Member: FINRA/SIPC. Only available in states where Emerson Equity LLC is registered. Emerson Equity LLC is not affiliated with any other entities identified in this communication

1031 Risk Disclosure:

There is no guarantee that any strategy will be successful or achieve investment objectives;

Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;

Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;

Potential for foreclosure – All financed real estate investments have potential for foreclosure;

Illiquidity – Because 1031 exchanges are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.

Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;

Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits.

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