'Qualified Opportunity Zones' - are they worthwhile?

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bgoodwin0922
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Joined: Tue Jul 25, 2017 5:17 pm

'Qualified Opportunity Zones' - are they worthwhile?

Post by bgoodwin0922 » Sun Apr 15, 2018 4:58 pm

Hello all,

I'm a long-time lurker, but I haven't seen much talk about this particular topic of the new tax laws, so I thought I would bring it up.

I listened to an episode of Freakonomics "Why the Trump Tax Cuts are Awesome/Terrible (Part 1)" which mentioned very briefly a new program which allows deferring capital gains from current investments by re-investing them within 180 days into "Qualified Opportunity Zone" funds, which would then have more tax benefits the longer you hold (at five years, seven years and 10 years). Timestamp is around 41:35.

Besides the financial benefits, the idea behind it, according to the below source material, is to promote investment and development in "distressed" areas where larger-than-normal portions of the community are in poverty or unemployed. Some say it will help, some say it will only hasten gentrification.

My questions to the group are:
  1. How do you feel in general about this newly-formed tax benefit?
  2. As buy-and-hold type investors, could the option to defer even more of your tax liability persuade you to re-invest your CG into an "Opportunity Zone Fund" rather than back into VTSAX or another equity fund? Obviously there would seem to be more risk involved.

I'm just reading and learning about all this within the past few minutes from the below sources if anyone hasn't read up on this yet:
  • Here is an interactive map where you can view which sectors of each state are eligible to be nominated for the "Opportunity Zone" tax benefit.

Thanks all, feels good to actually compose a post!

MrPotatoHead
Posts: 429
Joined: Sat Oct 14, 2017 10:41 pm

Re: 'Qualified Opportunity Zones' - are they worthwhile?

Post by MrPotatoHead » Sun Apr 15, 2018 5:56 pm

Yippee, in before the thread is locked.

I could make a lot of experience based comments for question one, but simply cannot see them fitting in with the guidelines

I'll answer to the title question posted,this way. You need to understand that the point is not necessarily if the project is profitable, the profit for many is made by the mere existence of the project.

And the answer to question two is, read the paragraph immediately above. With that experienced based knowledge the answer would be no.
Last edited by MrPotatoHead on Sun Apr 15, 2018 6:21 pm, edited 1 time in total.

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arcticpineapplecorp.
Posts: 2937
Joined: Tue Mar 06, 2012 9:22 pm

Re: 'Qualified Opportunity Zones' - are they worthwhile?

Post by arcticpineapplecorp. » Sun Apr 15, 2018 6:06 pm

I'm glad to see they consider golf clubs and country clubs to be "sinful":
2. Because of the broad assortment of uses of NMTC financing, the second factor for qualifying a project relies on prohibited and disqualifying uses. If the initial location threshold qualification is met, several disqualifying factors may still apply. First, a business or project cannot be operating as a “sin business” as provided in the following list:

a private or commercial golf course;
a country club;
a massage parlor;
a hot tub facility;
a suntan facility;
a racetrack;
a gambling facility; or
a liquor store."
What's sinful about getting a massage for a medical condition (i.e., a legitimate massage and not a code for some sexual activity)?
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

MrPotatoHead
Posts: 429
Joined: Sat Oct 14, 2017 10:41 pm

Re: 'Qualified Opportunity Zones' - are they worthwhile?

Post by MrPotatoHead » Sun Apr 15, 2018 6:25 pm

arcticpineapplecorp. wrote:
Sun Apr 15, 2018 6:06 pm
I'm glad to see they consider golf clubs and country clubs to be "sinful":
As an FYI, you may get around that by recharacterizing the purpose as a watershed for abating storm sewer runoff while providing recreational opportunities. The golf course is just there to pay for what is in reality a giant storm buffer for the community. It all is in the packaging.

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