qualified opportunity funds

The Differences Between Qualified Opportunity Zones & 1031 Exchanges

Many people have been asking about information regarding the qualified opportunity zones and where to find information about where the census tracts are that are designated as opportunity zones.

This information will be helpful to determine whether or not a qualified opportunity zone is a better option for you than doing the traditional 1031 exchange.

Perpetual Tax Deferral

Most people like 1031 exchanges because the tax deferral is indefinite and maybe even perpetual because you can defer your gains and there’s really no expiration date.

Qualified opportunity zone deferral, on the other hand, only lasts until December 31, 2026. At that point you’re going to recognize gains. Some of your gains may be forgiven if you hold the property for five or seven years, but the bulk of your gains will be recognized at that time. So it is a perishable tax deferral.

The qualified opportunity zone may be a more feasible method for tax deferral if you’re in a partnership and it’s difficult or impossible to break up the partnership and reconfigure the ownership to satisfy the holding requirements of owning the actual interest in the real estate.

Mortgage Over Basis

If you’re in a situation where you’ve got MOB (mortgage over basis), you may want to do the 1031 exchange and avoid the opportunity zone investment. In a qualified opportunity zone investment, you actually have to invest cash equal to the amount of your gains (or profit) into the qualified opportunity fund. But if you’ve got more debt than basis in the property you’re selling, you may not have the liquidity to invest cash into the opportunity zone. If you have extra cash lying around you can make up the difference out of your own pocket but who wants to add cash if they don’t have to?

The 1031 exchange may be a better play in this situation because you don’t actually have to reinvest the profits, you just have to reinvest the proceeds.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2022 Copyright Jeffrey R. Peterson All Rights Reserved

Contract-for-Deed Property & Balloon Payoffs – 1031 Exchange or Qualified Opportunity Zone?

Balloon Payoffs

In this article, we are going to discuss what to do when selling a property on contract-for-deed and receiving balloon payoffs. In this situation, is it better to do a 1031 exchange or invest in a qualified opportunity zone?

Selling on a Contract-for-Deed

If you sold a property on a contract for deed and are now receiving the balloon payoff from the vendee, it is probably too late for you to do a 1031 exchange on this payment because equitable title was probably conveyed when you granted the contract for deed (probably more than 180 ago) to the vendee, so another option to consider is to re-invest the profit or gain into a Qualified Opportunity Zone investment.

CPEC1031

At CPEC1031, LLC, we help taxpayers facilitating exchanges under section 1031 of the Internal Revenue Code. Our professionals have over two decades of experience guiding people through the 1031 exchange process. We can prepare all of your 1031 documentation, advise you on replacement property, and more! Contact us today at our downtown Minneapolis office or at one of our satellite offices to learn more about the exchange process!

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2020 Copyright Jeffrey R. Peterson All Rights Reserved

What CPAs Should Know About Qualified Opportunity Zones

CPAs Qualified Opportunity Zones

CPAs are always on the lookout for new tax-saving avenues that they can share with their clients. The new kid on the block is the qualified opportunity zone. In this article, we are going to explain what CPAs should know about qualified opportunity zones.

How Qualified Opportunity Zones Work

Qualified opportunity zones are a recent tax tool that allow investors to defer capital gains taxes when selling property. The catch is that you have to reinvest your capital from the sale into a “qualified opportunity zone” as defined by the governor of the state in which you are investing the funds. The important thing to remember here is that these taxes will come due on December 31, 2026.

1031 Exchange is Often a Better Option

Compared to the new qualified opportunity zones, 1031 exchanges are often a more tax-efficient option. The biggest difference between a qualified opportunity zone and a 1031 exchange is that there is no set date at which all capital gains taxes become due.

With a 1031 exchange you can defer your gains indefinitely by continuing to exchange into bigger and better properties – thus keeping your money hard at work for you as time goes by.

Get Help with Your Real Estate Exchange

If you’re looking for help with your 1031 exchange, you’ve come to the right place! CPEC1031 offers a full range of 1031 exchange services. Our qualified intermediaries can take the reigns of your exchange and ensure that everything goes off without issue. We’ll make sure you are fully prepared for the closing table. Contact us today to set up a time to chat with one of our 1031 exchange professionals about your real estate exchange. You can find us at our offices located in downtown Minneapolis.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

 

 

Opportunity Zone Glossary of Terms

Opportunity Zone Glossary

Opportunity zones are new tax incentives created by the Tax Cuts & Jobs Act. But since they are so new, many people are still wrapping their heads around them. In this article, we are going to define a few terms and acronyms that relate to opportunity zones.

QOZ – Qualified Opportunity Zone

A qualified opportunity zone is a designated area in which business must be conducted for the opportunity zone tax benefits to apply.

QOF – Qualified Opportunity Fund

A qualified opportunity fund is a partnership, C corporation, or S corporation in which a taxpayer can invest in and defer eligible gain on the sale of property.

QOZP – Qualified Opportunity Zone Property

A qualified opportunity zone property can be a qualified opportunity zone business property (QOZB) or an interest in a subsidiary that conducts qualified opportunity zone business.

QOZB – Qualified Opportunity Zone Business

A qualified opportunity zone business is a subsidiary that conducts qualified opportunity zone business and must meet the definition of a QOZB in order to do so.

Defer Your Taxes with a Like-Kind Exchange

When you’re embarking on a 1031 exchange, it’s important to have a qualified intermediary by your side to help facilitate the transaction. Our intermediaries have twenty years of experience that we can put to work for you. Reach out to our qualified intermediaries now to learn about how a like-kind exchange can save you money on capital gains taxes. Our main office is located in downtown Minneapolis (in the US Bank building) and we provide exchange services throughout the country.

  • Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

 

© 2019 Copyright Jeffrey R. Peterson All Rights Reserved

Defer the tax. MAXIMIZE your gain.