[IDCPA]

So, on a day I sent a mass email out to clients regarding the CARES Act, and have subsequently not touched a tax return all day, instead fielding questions, I had a mean-spirited client ask me about a potential build of his office in an Opportunity Zone.

2 Questions - I assume there's no REQUIREMENT to use realized capital gains to invest in an oppotunity zone right? He can still get the 10 year tax free benefit on the actual investment, right?

And he has a developer who can purchase the land and do a build to suit on it or he can buy the land and have the builder build on his land.

Does my client have to buy the land before the build or does it matter if he buys it under contract from the builder who purchased the land?

[ManVsTax]

I assume there's no REQUIREMENT to use realized capital gains to invest in an oppotunity zone right? He can still get the 10 year tax free benefit on the actual investment, right?

Yes and No. He does not need realized cap gain to invest in a QOF, but if he wants the associated benefits he does. Realized capital gains must be used to get all QOF benefits. Otherwise, the ownership interest functions just like any other partnership/S Corp/C Corp interest.

I think that renders your other questions moot unless your client is expecting material cap gain soon, or can generate some.

[IDCPA]

Realized capital gains must be used to get all QOF benefits.

Trying to define 'all'. Do you mean he has to have realized capital gains to get ANY of the benefits or to get the FULL benefit.

IOW, If he buys the land with $400K from his bank account and puts a building on it, does it not qualify for the full step up in basis after 10 years? Do you have to use realized gains to get that benefit?

That's not how I read your statement, but your conclusion that my other question is moot implies that's what you meant..

[ManVsTax]

"All" should be "any".

[IDCPA]

Okay, so does the original purchase (in this case, just land) need to be purchased with proceeds of a realized gain.

I assume he can't sell a stock with a $10 gain, add the proceeds to $399,990 to purchase a the land and receive the step up in 10 years.

Not sure why I'm even asking this obvious question, but just turning over every rock.

[ManVsTax]

Okay, so does the original purchase (in this case, just land) need to be purchased with proceeds of a realized gain.

Take a step back. The investment into the QOF needs to be made with realized cap gain to get any of the benefits. He can't just purchase real estate directly. A QOF is a partnership, S Corp, or C Corp that has made the election.

I assume he can't sell a stock with a $10 gain, add the proceeds to $399,990 to purchase a the land...

He can, and he'll be deemed to have bifurcated interests for 1400Z-2 purposes. One qualified, one not qualified.

Highly encourage you to read through 1400Z-2 in the off season. It's all in there. Pretty clear.

[IDCPA]

Thank you. I'll definitely do that. Just trying to deal with a client question during the storm. Appreciate your help.

[ManVsTax]

We've all been there. Good luck.