Our Next Event: Alts Expo - October 4th
The OZ Sherpa himself, Mr. Ashley Tison returned for another edition of “Ask The OZ Expert” at OZ Pitch Day on July 20, 2023.
Today’s episode is a recording of that live segment, wherein Ashley addressed several questions from the audience.
Watch On YouTube
- Treatment of a spouse’s gains for Opportunity Zone investment purposes.
- How the May 11th end to the COVID-era national disaster declaration may impact Opportunity Zone investments.
- How interim gains within a Qualified Opportunity Fund get treated with respect to an investor’s 10-year hold clock.
- How Opportunity Zones can save failed 1031 exchanges, and new information from Gerry Reihsen on when a 1031 investor’s 180-day clock restarts.
- Ashley’s thoughts on potential Opportunity Zone reform legislation.
Guest: Ashley Tison, OZPros
- Ashley Tison on LinkedIn
- OZPros – Discount for OZ Pitch Day participants
- Special appearance by Gerry Reihsen
About The Opportunity Zones & Private Equity Show
Hosted by OpportunityDb and WealthChannel founder Jimmy Atkinson, The Opportunity Zones & Private Equity Show features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in Opportunity Zones and the broader private equity landscape.
Jimmy: Let’s move on. This is maybe the most highly anticipated segment of the day. We’re bringing on the OZ Sherpa himself. That’s right, the OZ Sherpa himself, Mr. Ashley Tison, to run the OZPros workshop. I like to call it, ask the OZ expert. Sometimes I refer to it jokingly as., stump the OZ expert or stump the Opportunity Zone attorney. So here he is, Mr. Ashley Tison. Wow, look at that hat. Love that hat, Ashley. Ashley, where in the world is Ashley Tison today? Where are you joining us from, Ashley?
Ashley: So I gotta give you the visual, Jimmy. This is not a background. This is actual Positano, Italy.
Ashley: Yeah. We actually just got back off of a boat ride from Capri. It’s wine-30 here, Italian time, but we’re ready to roll. We’re going to knock some expert questions out and get you guys squared away.
So, you know, a little bit further than my usual Caribbean haunts, right? And unfortunately, there’s no Opportunity Zones over here yet, but I’m trying to figure out a way to be able to spread the program over here.
Jimmy: I was going to ask if that might be an Opportunity Zone location. It looks pretty nice. We’ve got a few questions that are pent up from the last couple of hours that I’ve kind of been holding on to. So Scott asked really early this morning… I’m not even sure if he’s still here, but if he is, he’ll get his question answered. Scott asked, “My wife has gains in her name. I have gains in my name. Can these be combined?”
Ashley: Well, if it’s her time and his time, isn’t it their time? A little Spicoli action right there, right? Absolutely. So you guys can invest either way. A lot of times, husbands and wives file jointly. So what, a lot of times, folks will do is end up spreading the gain and going 50-50 inside of their QOF. A QOF has to be a partnership though. And so we highly recommend that you don’t just do a husband and wife.
But if you wanted to keep it separate and have one be his gain that goes into a QOF, one of her gains go into a QOF. The key thing is just add somebody else into the mix relative to a partner, so that way, it’s truly a partnership and you don’t get squawk from the IRS that a husband and wife aren’t truly partners.
Ashley: Yeah, absolutely.
Jimmy: Lisa has an interesting question here. She wants to know, “Hey, what if I don’t want to pay the initial capital gain tax in 2027? Are there any strategies for further kicking that can down the road and deferring the capital gain recognition past that 2026 date?”
Ashley: Just don’t pay it, right? And then you may get audited, you may go to jail, right? Just don’t pay it. No, that is unofficial advice. And I’ve only actually had half a glass of wine at this point, so it’s not the wine talking here. But where would we be without a little comedic effect? But there’s absolutely strategies that you can employ. That’s one of the great things about Opportunity Zones is what it allows us to do is to literally go back in time. We could go all the way back to January of 2022 right now, grab a gain, as long as it came from an S corp or a partnership, pull it into this year. And then we defer the taxes until 2026.
And so you can invest in solar arrangements. You can invest into other real estate investments that have lots of depreciation and other stuff. And then whether it’s the current legislation that is pending in the House right now, or whether it’s new legislation that ultimately gets modified, we’re anticipating that deadline is going to get extended out at least two years, potentially three, maybe even four. So stay tuned on that one. I think that we’re definitely going to see something happen on that.
Best case scenario is that legislation gets introduced right around the Novogradac conference that’s happening right around, like, November 1st in D.C.
Jimmy: Can’t wait for that to happen. I’ll see you there, Ashley.
Ashley: And yeah, fingers crossed that ’26 date becomes ’28 or ’29 or ’30. And maybe eventually, it gets extended beyond that. But don’t count on it now, but it’s a possibility.
Jimmy: I gotta ask this question.
Ashley: And I’m probably not going to wear this Sherpa hat, but I’m probably going to bust out the cowboy hat for that conference, right?
Jimmy: Oh, man. Can’t wait to see that. I got to ask this question next because the name of the individual sounds Italian. You’re in Italy. Gianni Santucci wants to know, “Does a business that sells IP rights that operates out of an OZ property, can that qualify as a qualified Opportunity Zone business?”
Ashley: Now, the question is, what exactly the IP rights are that are getting sold? And if you’re just licensing IP rights, you got to be really careful about that. Now, if you’re in the business of basically, like, grabbing IP rights and then doing licensing deals, and you’ve got employees and you’ve got equipment and you’ve got all kinds of other stuff that’s happening inside of the zone, then I don’t think that that’s going to be a problem.
Really, the tricky thing is that if you’re a regular business that’s operating outside of the zone, and then you go prop up an entity that’s inside of the zone, and you have, like, two employees there, and then you effectively license your IP rights out of that, I think that that’s a problem. Because you’re effectively trying to off-balance sheet your intellectual property. And I don’t think that would qualify. I think you get hit with a substantial abuse bat with that one.
But I mean, almost all intangibles are going to be utilized if you’re actually conducting a business. So I’d need a little bit more details on that. I’ll be happy to talk about it on a strategy call or in OZ Ascent, which happens every Tuesday from 10:00 to 11:30 Eastern time. And we could absolutely flush out the details on that and make sure that you’re squared away, make sure that you’re complying with the full five tests, right?
Which are, 70% of your property needs to be qualified Opportunity Zone business property, 50% of your income needs to come from a trader business happening inside of the zone. And that’s based upon where your employees are or your independent contractors. And then 40% of your intangible property needs to be used inside of the zone. That’s the one we need to flush out.
Also, you got to be careful about the 5% non-qualified financial property rule, which if you have a working capital safe harbor, then you are good. And, Jimmy, make sure that we get some time to carve out and to talk about the extension from and the ability to be able to amend your safe harbor now that we are out of the COVID national emergency.
Jimmy: Ashley, are you down with NQFP?
Ashley: You know me.
Jimmy: Well, do you wanna…
Ashley: You’ve been waiting so long to ask me that.
Jimmy: Well, you mentioned non-qualified financial property. Did you want to address that point right now?
Ashley: Yeah, let’s go ahead and hit it. So the government officially brought an end to the COVID national disaster on May 11th in 2023. And as part of that, they said, “Hey, listen, if you needed to amend your working capital safe harbor plan in order to cover your NQFP, then you’ve got 120 days from May 11th in order to get that done.”
So that effectively gave everybody that was in a working capital safe harbor that needs amendments or needs some kind of, you know, amendment done to it, which is pretty much everyone because, let’s be honest, about how many people actually have one that they’ve done, you need to get it done. And you need to make sure that you get it done by September 11th, and that you get it somehow document stamped, whether that’s emailing to me, the Sherpa, or whether that’s emailing it to your accountant or whatever. Just make sure that you make it happen and that you get one in writing and done.
So not this next Tuesday because I’m still going to be in Italy, but the Tuesday after that, we’re going to be covering that in depth at OZ Ascent. If anybody wants to join, let us know, drop us a chat or hit us with an email. We’ve got a special webpage that we’ve got propped up with discounted strategy calls and other kind of cool stuff for the people that participate today, and we can get you into Ascent for a discounted fee and get a discounted strategy call set up too if you want to go direct.
Jimmy: Man, I kind of want to join Ascent. That sounds pretty cool. I’ll ask you about that a little later. I did want to interject. We had a question from Rachel, wants to know more about the conference details about the Novogradac conference. I’m going to talk about that for just a second.
And by the way, I know we’ve got at least one of my friends from Novogradac listening in right now. I am waiting to get the opportunity DB discount code for that conference. I think everybody who follows me will be entitled to I think it’s going to be a 10% discount. Don’t hold me to that, but some sort of discount code will be available for Opportunity DB followers if they want to attend that Novogradac conference. We’re media partners with Novogradac. They’re a great organization.
Details on that conference. They are holding an Opportunity Zone Summit, November 1st in Washington, D.C. I’ll have more details forthcoming if you follow me. And if you follow Novogradac, you’ll hear plenty more from them as well. We’re not the organizer of that conference, but we are partnering with Novogradac and I’m looking forward to it.
So let’s see. Next question here. I want to get to Paul. Oh, no, hang on. Let me get to Paul’s question in a minute.
Here’s a question that’s appropriate given your location overseas, Ashley. Can foreigners invest in Opportunity Zone funds? If you have an Italian friend, can he invest in an Opportunity Zone fund? Are there any advantages for him? Talk to us about that.
Ashley: Absolutely, especially if he has any kind of U.S., you know, tax basis and tax liability. If he doesn’t, it’s probably not going to do him a whole lot of good other than investing in the great deals that the sponsors that are on this show and that have been showing you guys.
So anybody can always invest into an Opportunity Zone deal. It’s just that they don’t have capital gains from being subject to U.S. tax treatment, then they’re not going to get the step up and basis to fair market value.
One of the other things that they have to do is they have to basically elect out of kind of the foreign tax treatment. It’s a little form on Form 89. I think it’s on 8997. So we can walk anybody that’s got those facts through those details.
Do you want me to rip through these other Q&As here, Jimmy?
Jimmy: Well, I wanted to… I don’t know if you have access to a couple of the ones from earlier.
Jimmy: But Paul asked a question that I didn’t really know the answer to or I didn’t give him a satisfactory answer at least. He wanted to know what benefits exist for the seller of an Opportunity Zone project and can the seller take advantage of any of the tax benefits. And in his example, let’s say the $8 million price on the sale becomes $9 million just so a deal can be made and then the seller invests that $1 million in the project. Is that okay? What’s the deal with arm lengths, transaction, and what incentives will the seller now have in that example?
Ashley: Other than the fact that he’s going to be able to crank up the price because somebody wants to get that Opportunity Zone deal, really none. Because if he takes that money and he reinvests that into the deal, the IRS is going to consider that circular cash flow and they’re going to potentially strike down both the validity of the dirt and certainly the validity of the investment.
Now, here’s the rub on that. If he can find a million dollars worth of gain from somewhere else and he can take that million dollars of gain and plug it into the project, then that’s absolutely fine. But he has to have some kind of calculable gain from somewhere else that he’s technically now placing into the project so that way he doesn’t get hit with the circular cash flow rules.
Jimmy: Good. A question earlier from Scott. I’m not sure if you have access to this one or not, Ashley, because it might have been posted before you joined. Scott says, “Hey, I invest in a qualified Opportunity Zone fund and the property that the fund holds is sold five years after that. Can I roll over new gains or does the 10-year holding period reset or is the original 10-year period used? How does that work when assets within a fund get sold, essentially, when it comes to that 10-year clock?
Ashley: Yeah, I saw Kirk in here earlier and this is their whole premise of their fund is that they’re flipping before the 10 years. They’re exiting with… Because they’re like, “Hey, listen, that’s the best time for us to exit because that’s when we get the most value.” And that’s absolutely fine.
There’s two things that you can do. You can either distribute the gain and then you can reinvest that gain if it’s before 2026, right? If you experience a gain before December 31st, 2026, you can reinvest that into a qualified Opportunity Fund and defer the gain that way. That’s going to reset your clock for that reinvestment.
Or if you don’t want to reset the clock, you can keep the money either at the QOZB level or at the QOF level and then reinvest that into either another QOZB, the same QOZB, or just additional property and that will not reset your clock. What that’s going to do though is that’s going to trigger taxes payable on that capital gain, but just go ahead and pay the taxes, right? And then you can…you would be eligible to…you know, you’re going to be fine.
What’s really interesting and we’re flushing this one out in Ascent, so if you could join us in OZ Ascent, we’ll be happy to kind of bump this one out too, is that theoretically, you could keep the money inside of the QOF and the QOZB. It could generate a gain and then you could probably take money from somewhere else, roll it into another QOF in order to offset that gain and I think you’d still be okay.
You would obviously end up having a new 10-year clock on that. But if you don’t distribute the money, I think that it’s actually okay to reinvest that and it’s not going to reset your clock for that specific qualified opportunity fund. Those are kind of your three options.
Jimmy: Yeah, a lot of options, a lot to consider there. I wanted to touch on a couple of things that Gerry said, first of all. Gerry did post a link to that Novogradac conference in the chat so you can get tickets there, I think. Or otherwise, if you want to wait a few more days, I should have a coupon code available to get you a discount. But if you don’t care about that, go ahead and just get those conference tickets now, Washington, D.C., November 1st. I’ll be there. Ashley will be there. I’m sure a lot of people on the call and some of the funds that you’ve heard from today will be there as well.
And then Gerry has a question for Ashley that he thinks might stump him, so are you ready for this, Ashley? He asks, “Do sales of carbon credits for a gain result in capital gains that can be invested in a QOF?”
Ashley: So once again, I’m not an expert on carbon credits, so it’s not really fair relative to…
Jimmy: Oh, he might have stumped you!
Ashley: Dude, I would be hardcore. Like, I’m not getting dunked for that one. But I do think that as long as it is a capital gain, which I think that…I don’t know that carbon credits are considered a capital gain because I think that they treat it similar to like Bitcoin mining, which I don’t think is actually a gain event. I also don’t think that because they’re tax-free, I think that the sale of carbon credits may be tax-free. And so once again, we’re going to have to ask a carbon credit expert on that one.
But, Gerry, I’d love to talk with you about that one. I love the boondoggle of carbon credits, and apparently, we’ve got somebody in Ascent who’s actually done them before. So join Ascent, Gerry, and let’s fire it down, man. We may have to have a separate workshop on carbon credits just alone.
Jimmy: Ashley, I think you have access to all the questions still outstanding if you want to run through them yourself. But before I do, I got a direct message from our guy, Andy Hagans, who says, “I always love the Sherpa’s hat. Fits you and your style 100%.” I couldn’t agree more. I don’t know if he wanted me to share that comment or not, but I had to get that out there because, hey, you got the hat.
Ashley: Awesome. All right, so I’m going to fire through these real fast because I know we’re coming up on time.
Jimmy: Please do. By the way, Ashley, we do have a little bit of time left here. Our next presentation doesn’t start until 2:00 p.m. Eastern, so we’ve got another 15 minutes or so. So you don’t need to read through them too quickly.
Ashley: Okay, great. All right. So I thought that we were like… You’re usually pigeonholing me into, like, 20 minutes. Now we can riff and joke around, and you can ask the questions, and I can answer them leisurely. I don’t have to rocket through them, which is kind of fun.
Jimmy: This segment’s proved so popular. I think they may have squeezed out an extra few minutes for you this time around. So anyways, go on.
Jimmy: Go ahead and rip through these questions how you’d like.
Ashley: All right. Gary invested in an OZ fund that renovates small multiple-family projects in Columbus. No plans for cash and refinancing until after 10 years, but the sponsor gave him a letter to elect to receive a distribution after five years to pay his taxes.
So I would assume that they’re probably doing a refinance distribution in order to do that. I would confirm that, Gary, or just confirm that there’s some kind of income that’s coming in relative to that distribution and that it’s not going to be treated as a return of capital.
That’s really important for everybody that’s either got their own fund or they’re invested in another one is that you need to make sure that your fund and your accountant is not treating any of the cash that’s coming out of that as you make money in it as a return of capital. Most of the times in a real estate deal, that’s what you want, right? You want to book as much as you can to a return of capital because that way, you’re not paying taxes on it, right?
In this case, it’s the exact opposite because if you treat it as a return of capital, it could be considered an inclusion event. So make sure that your accountants are on top of that. Once again, we’ve got a great accountant, we’ve talked about this before, inside of Ascent. We’d love to have people participate in that.
One of the cool things about Ascent, there was another question in there that I answered in the chat, is that if you sign up, it’s 350 bucks a month or it’s $3,500 annually, which basically saves you two months, and it gets you access to all the documents. No matter which way you do, you end up getting access to all of the pre-done episodes that we have. And you can search those, and you can pull up the videos right where we’ve talked about this exact issue before.
And then if you’re like, “Hey, listen, I’m too lazy, I don’t want to search all the videos,” just jump in Ascent. Ask it again. And we’ll fire through it again to make sure that you understand it.
Gary’s got another follow-up question. Okay, he’s got… So you’re doing them in Columbus and in Cincinnati. That’s kind of cool, right? He’s got them in both places. Maybe this is Clint’s fund. Who knows, right?
Jimmy: It sounds like it could be Clint or he should get to know Clint because, yeah, Clint is doing a lot of work in those areas as well.
Ashley: Which is awesome, right? We’re making friends here. “Rather than a preferred distribution, they increase the unit price 2% each quarter. His purchase price is $26,000. Pricing is now $32,000. Is there a secondary market for me to sell this OZ fund at a discount from the $32,000? And if so, what discount do investors look for?”
So there’s really not a secondary market yet, but you may get some people biting right in the chat that are like, “Hey, dude, I’m interested in that.” The interesting thing though is that they’re going to start over a new 10-year period if you sell it to them. So that’s first.
Now, because you’re obviously in at preferred pricing, you know, sure, mark it up. Split it with them, right? Whatever. And I think that in kind of perfect harmony, like in a perfect information place, which now everybody on this call has, right, you’re going to basically get to a 50% split between the buyer and the seller because that’s a win-win. So look for the win-win, Gary. If you need some liquidity and you can exit it right now and you can find a buyer, I’d say split the difference with them.
All right, Rhonda, good to see you in here. It’s awesome. Is it better to use a loan broker or mortgage broker for a lease to purchase options for single-family housing projects in the Opportunity Zone? What are the additional advantages to this business model outside the tax incentives?
So I’m assuming that you are going to be doing…you’re going to be buying the houses and then selling them on a lease-to-purchase option. And so I don’t know about a loan broker or a mortgage broker. I would be looking for a good attorney and a real estate agent, right, that can help you with that.
The other thing that you’re really going to want to make sure of, and this is big because in North Carolina and South Carolina, a lease with an option is a lot of times treated as a sale for purposes to state law. And you need to make sure that doesn’t happen, right? Because you don’t want that to be imputed to you and to have the IRS have an argument that you actually sold it and that you did so on seller financing. Because in North Carolina, that’s how it gets done is that, effectively, a least with an option, is treated as seller financing. So make sure that your state doesn’t do that.
So once again, I’d get a good attorney that knows what they’re doing and that’s done lease options before and then get a good broker to help you market it.
All right, Brett wants to know how an OZ… Man, I tell you what, Jimmy, did you like send these out to people to, like, tee up fantastic questions for me? These are like softballs.
Jimmy: I’ve been promoting this for a long time, Ashley. We’re excited to hear from you. So yeah, keep going.
Ashley: That’s awesome. All right. So OZs eat 1031s for breakfast. And one of the main reasons why is because we can use them to save failed 1031s. Now there’s two ways we can do it is if you came in through a partnership or an S corporation, if your game came that way, then we can elect your 180 days to either start on the day of sale or on December 31st or on March 15th. And so effectively what we do is we just wait till December 31st or March 15th in the next year. And then we could take that money and we could put it into an OZ deal. And we’ve effectively deferred the taxes, like, and gotten all the benefits of Opportunity Zones.
Now, if you placed your money with a QI and you are inside of your 45 days, and it’s not through a partnership or an S corporation, you want to make sure to neither identify, right, so you can either, before the 45th day, you can request to get your money back from the QI, or you can only identify one property. And if you do so, whatever the delta is between the identified price and what your money with the QI is, the QI is going to send that back to you.
If you’re past the 45th day and you’re not through a partnership or an S corp, there’s really not a whole lot we can do with that cash that’s with the QI, right? Because I’m almost positive they’re obligated by law not to return that to you until day 180. And for a 1031, the 180 days starts the day after the sale. For an Opportunity Zone, it starts the day of the sale. And so you’re literally a day late and a dollar short. And so yeah. You like that, Jimmy?
So if you are and your money is stuck with a QI, you can take money from somewhere else, and you can put that into your Opportunity Zone fund. We’ve got some resources as well that if, for whatever reason, you can’t get access to cash, we can find some hard money for you. It’s expensive. But if you look at the value of it, a lot of times it’s worth it because literally, you’re borrowing it for, like, two days. And so you assign the rights out of the QI to the hard money lender, they get you the money so you can drop it in on day 179, and then they get the money from the QI at day 180. So that’s how we save a 1031.
All right, so Jim’s asking about legislation to expand OZs. It’s H.R.3937, I believe, and it’s called the Small Business Jobs Act. That’s the current legislation that’s out there right now. And we’re anticipating that’s either going to get amended, you know, as it works its way through, or that there’s going to be new legislation that gets introduced, potentially from, you know, either Tim Scott or Cory Booker.
Jimmy: By the way, I just linked to that Small Business Jobs Act in the chat. It is H.R.3937. I also think, yeah, the Booker and Scott legislation that they introduced last year, the Opportunity Zone Transparency and Reporting Act, should get reintroduced sometime later this year, I’m hopeful. And that might be the one that has the most support, but they got to get Senator Wyden on board. I don’t know if you have any more comments there, or we can leave it at that because we got a lot more questions.
Ashley: Yeah. Let me fire through the comments. So I just want to state that we need to sit down with Senator Wyden, and we need to get a bunch of people that have done great opportunities on deals in a room with him so he can see the positive effect that it’s having, right? Because there’s lots of naysayers, there’s lots of examples where people are taking advantage of it that are in the “Huffington Post” and other stuff. But man, we could put fund after fund in front of him that’s where it’s the exact opposite.
So, all right. Brett wants to know if he contributes to an OZ in August, example of the straight point deal that is closing soon, right, and he doesn’t get his capital gain until three weeks later, does it still count. Now, since because it’s in the same tax year, arguably, you’re probably okay.
What I would do to be on the safe side is that I would book the money in as a loan. So that’s one of the ways that we fix stuff when somebody doesn’t have a capital gain, is that we put the money into their QOF and we book it as a loan, and we wait for them to get a capital gain sometime before December of 2026. You do the same thing here.
Now, if it’s a big fund, it might be a little bit more difficult for them to do that because you’re effectively going to have to recycle the cash, right? So after you get the gain, you’re going to want to dump that money in and get your money back out from the fund. So you want to have that paper trail to back that up, but you can absolutely loan the money in and then backfill it with capital gains later on.
So, yeah. Gary’s talking about 2022 K-1s. I’m not going to touch that one because we wouldn’t know anything about late K-1s, right? Man, as Andy’s on the line and other folks are on, right? It’s tough, man. It’s like herding cats trying to get all the stuff done, right, that needs to happen, right, in order for it to flow from the QOZB up to the QOF. And God bless you if you got multiple QOZBs inside of a QOF. So, Gary, I can identify with your folks that are working on trying to get those K-1s out.
Jimmy: The K-1s are very rarely on time. Now, by the way, I’m letting Gerry Reihsen crash the party here, Ashley, because he’s specifically requested.
Jimmy: He wanted to come in as a panelist and clarify something regarding 1031s. I think he’s got a question for you. So, Gerry, if you want to turn on your mic and your camera, come on in. The water’s fine. We’d love to hear from you. Gerry, there he is.
Gerry: Hey, guys.
Ashley: Dude, where’s your hat?
Gerry: I’ve been chilling here at my house here. I’ve been stuck here. Just didn’t go to work, listening to this great presentation as Jimmy always does present. I just learned in the last month that Ashley didn’t seem to acknowledge, and I didn’t know it either, when you put your money with a qualified intermediary, that defers your recognition of capital gains. And it’s the date of capital gains for that transaction now is the date the QI returns your funds, partially or in whole.
So, the 180 days are not running concurrently for Opportunity Zone and 1031, which means if you come the end of your 1031, 180 days, you have another 180 days or you might even push your tax event to the next year. And then if you did it through a partnership, you have until the next September 10th to invest in an Opportunity Zone vehicle. Did you know that? I didn’t really hear that in your answer.
Ashley: So, Gerry, I had no idea that was the case.
Gerry: I just researched that.
Ashley: I’m gonna have to do some research to verify that.
Gerry: No, I researched it with Blake.
Ashley: You did?
Gerry: I researched it with Blake last month for a guy who had 15 million… No, no, it was…
Ashley: So what’s up? What’s up? You’re not calling me to share the knowledge? You call Blake and you guys flesh this out? You don’t call the Sherpa? Come on, man. I’m hurt.
Gerry: No, it was Blake’s client. So, we researched it together.
Ashley: All right.
Gerry: But so, for the example you provided, if you don’t identify enough in the 45-day period and the QI returns a partial amount, that’s when that partial amount of capital gain starts running. And then if it goes to 180 days, which this fella did that we were representing and he doesn’t find anything to invest in, my gosh, you’ve just…talk about being able to put off your time to invest in Opportunity Zone stuff, right? You can always do a 1031. And then you could do a QOF.
Ashley: Hey, Gerry, be quiet. We’ve got a bunch of funds on here that are trying to get investors in the door, right?
Gerry: Right, right. I’ll let you go.
Jimmy: Well, Gerry, that was fascinating.
Jimmy: I did not know that. I learned something new and I think you’ve officially stumped our expert twice now. So, good for you, Gerry. Yeah.
Gerry: Right, well, you know, I’m always thinking…
Jimmy: Three strikes and you’re out, Ashley. So watch out.
Ashley: You know, we may have to make this the Gerry Ashley show, right, next time.
Jimmy: Thanks, Gerry.
Ashley: All right. So, the final question, I don’t know if this is the final question, if we got more time after this or not. If I invest today, but they don’t close the offering funding for another month or so, what date can I use towards the 180-day timeline? As soon as you put your money into your fund, that stops your 180 days. And so it’s whatever date you put the money with the fund, whether that’s with a professionally managed fund or your own. So, that’s on the 180-day clock.
Wow. I tell you what, that’s really cool. And I definitely need to run that to ground because that could be a game-changer relative to, like, how we’ve been treating and what happens within 1031s because, you know, at that point in time, it’s like, okay, well, you really got to look long and hard at, okay, do I want to do a 1031 versus an Opportunity Zone.
Let me highlight some of the additional benefits of an Opportunity Zone as opposed to a 1031. First is that it eliminates capital gains as opposed to deferring them. With a 1031, it just defers the taxes until you sell it again or until you die. And a lot of people are like, “Oh, well, I’m just going to take this step up in basis at my death.” The problem is you take the step up in basis at death, and there’s not a whole lot of people talking about that. But all of that amount goes towards your lifetime exemption, which, by the way, is now $23.4 million for a married couple. And it’s going to drop. We don’t know exactly the number, but it’s probably going to be around $5 million per individual, around $10 million to $11 million per married couple.
And so if you’ve got between a $5 million to $10 million estate right now, you need to be concerned about that and need to be looking at what impact that’s going to have on your estate taxes. Because it’s up, it’s 40% within 180 days of your death. And so if you don’t have life insurance or other cash, you’re selling assets at that point in order to make the government whole.
The great thing about Opportunity Zones is that they freeze your estate value at the amount you contributed to the QOF. That’s the amount that goes against your estate, not what the fair market value is at the time. So I love OZs. I love you, Jimmy. And I think we’re wrapping this one, aren’t we?
Jimmy: We are pretty much wrapped on time. We’re going to move on to Greg Genovese in 65 seconds exactly. But before that, we did get one more question from Andy. And I think you can answer this one in about 10 seconds. What if you put in more than your gain? What if you put in some non-gains dollars on top of your gain?
Ashley: So as long as you loan the non-gains dollars in, then that’s not going to have any impact on you. If you put it in as just regular cash, that’s going to be a non-qualifying investment. And so you wouldn’t be eligible for the step up in basis on whatever amount there was not capital gains.
So a lot of times what folks will do is that they’ll book that in as a loan. Or if they like the deal enough and the sponsor can’t…you know, they’re not set up to be able to process that, then they can…they’re like, “Hey, listen, I’m just going to pay taxes on this portion of it.”
Jimmy: The OZ Sherpa, Mr. Ashley Tison himself. If anybody wants to get in touch with you, the Sherpa, or OZPros or OZ Ascent, where can they go to learn more?
Ashley: Yes. So if you go to ozpros.com and I’m going to try the link right now to make sure that we’ve got…
Jimmy: I think it’s ozpros.com/pitchday. Last time it was, anyway.
Ashley: So I’m almost positive that you are correct. And if you just go to ozpros.com, you can definitely. Here we go. Yep, it’s ozpros.com/pitch day. And you can book a strategy call there. You can sign up for Ascent. We also have QOF, QOZB setup packages that we do for folks. And we’re actually working on a compliance package as well, where we’re actually going to be doing the compliance testing and kind of outsourcing that for folks that have a need. So we’re going to be working on funds. We’re going to be working on individuals that have self-directeds. And so just a little bit of a peek behind the curtain there.
Jimmy, it’s a pleasure, man. Thanks for having me on.
As always, it’s been a great time.
Jimmy: Ashley, arrivederci, as they say in Italy, I think. Is that Italian? Did I get that right? I don’t know.
Ashley: Yes, you did.
Jimmy: And by the way, we’ve got an Italian joining us right now on stage. Greg Genovese, my favorite Sicilian, is on. So we’ve got a lot of Italian influence on the call today. Ashley, I’m going to bump you down to attendee.
Ashley: Oh, buona sera.
Greg: Wait. Wait. I need to make a comment to Ashley.
Jimmy: Please do.
Greg: He’s on vacation. So I saw him and Gerry talking and being the only full-blooded Italian, these guys were doing…I’ll try to keep my hand movement to a minimum on my presentation. I see he’s got his Sherpa hat. Great to see you, Ashley. Great job as usual.
Ashley: Yeah, I need to unbutton my shirt a little bit more too, right?
Greg: I hope you’re enjoying yourself.
Jimmy: Thanks, Ashley.
Ashley: Fantastic, man. Fantastic. Thanks, guys.
Greg: Take care, buddy.
Ashley: We’ll see you.