How can I benefit from OZs as a small direct investor and developer?

Answers

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  Matt Campbell

  Hall Estill

  December 04, 2020

  Any small direct investor and developer could set up a QOF and QOZB, and then syndicate the QOF through a Reg D, 506(c) offering to raise capital with others that have capital gain and wish to invest in this manner and in the area you intend to build. The development land should be purchased only after the structure is set up and there is an ability to build and sell homes at the QOZB level. You would have to check the rules around land holdings but this can work and allow sales of homes built to trigger ordinary income picked up along the way, with the capital gain investors still getting their deferral on the original capital gain contribution. Plus, a step up of some kind after 10 years if they hold their QOF interest that long.

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  Matthew Rappaport

  Falcon Rappaport & Berkman

  December 04, 2020

  If you don't have any capital gains to defer into a QOF yourself, you cannot take advantage of the OZ tax benefits. The best you can do is use the vehicle to raise funds from people who do have capital gains so that those people can get the tax benefits. It'll make the cost of capital cheaper for you.

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