1. Opportunity Zones Option 1: Invest in Existing Fund
Option 2: Create Your Own Fund
Option 3: Start a Fund with Other Investors
Opportunity Zones
Part of the new tax law signed on December 22, 2017, to encourage economic development and job creation in economically distressed areas.
Opportunity Zones were chosen by states’ governors based on census data. Clinton is one of 62 in the state of Iowa. Below is Clinton’s Opp. Zone:
A. Capital Provider(s) Real estate investor(s) selling highly appreciated property and are interested in finding new projects to invest in.
Project: Developer purchasing single and multifamily properties to renovate and rent within Clinton’s available Opportunity Zones and wants to bring in additional capital.
B. Capital Provider(s) Successful business owner selling to employees taking over the business. Has low basis in the business resulting in large gains.
Project: Creation of a small business incubator inside of Clinton’s Opportunity Zones. New business can be created inside of the Zone and support, services, and mentorship can be provided.
C. Capital Provider(s) Individual(s) who have capital gains on their investment accounts and are looking to exit their current positions.
Project: A developer looking to build a hotel in one of Clinton’s Opportunity Zones and needs to raise capital.

2. Deferral of the gain up to 2026
Potential exclusion of the original gain of up to 15%
A potential exclusion of 100% of the future gain recognized on the sale of the qualified investment
Individual sells stock on 8/01/2018 for $250,000.
They had purchased for $150,000, realizing a $100,000 gain.
Within 180 days of sale, he invests that $100,000 gain in a Qualified Opportunity Fund.
Benefit #1: They can elect deferral of taxation up to 2026.
Benefit #2: If new investment is held:
5 years, exclude 10% of the rolled-over gain, taxed on $90,000
7 years, exclude 15% of rolled-over gain, taxed on $85,000
Benefit #3: Hold investment for 10 years, investment grows in value to $149,000 then; since new investment is held 10 years, they get a stepped-up basis in the new investment equal to 100% of its FMV. So instead of having a $100,000 basis, they now have a basis of $149,000. If they sell that day, there are no Federal tax.
Who can benefit?: Individuals, C corporations, S Corporations, partnerships, trusts, estates. Even the owner of a flow though entity will have the option to defer, if the entity chooses not to defer at the business level.
What gain can be deferred?: must be capital gain arising after 12/22/2017 and prior to 01/01/2027
No sales of inventory or gain subject to depreciation recapture.
Sale cannot be to a related party. The corporate rule of 50% or more changes to 20% or more.
Any investment in excess of your gain is not eligible for the tax benefits.