Investing in Opportunity Zones in SC

As Benjamin Franklin quoted in 1789, “Nothing is more certain except death and taxes.” Tax deferred exchanges and strategies are highly important to consider if you are a property owner or investor in commercial real estate. 1031 Exchanges known with the Internal Revenue Code is a legal option to defer taxes on a property sold. The basics is to replace property sold with other like kind property with the entire proceeds from the sale. It has to be non-personal real estate and assets that qualify for productive use in a trade or business. This includes Investment Property, Income Producing property or unimproved property held for profit. Planning ahead with your CPA and (QI) Qualified Intermediary is your first step in accomplishing your exit strategies to (ONLY) defer capital gains with your property.

Investing in Opportunity Zones is another tax deferment incentive recently introduced to South Carolina. In general, investors can sell their existing properties that generate capital gains. Within 180 days, the investor contributes the entire proceeds to a (QOF) Qualified Opportunity Fund that purchases investment property or (QOZP) Qualified Opportunity Zoned Properties for up to a 10 year holding period. The gains are forgiven of the investment based on the future fair market value at that time. It’s a “No Brainer” no tax on appreciation of the commercial property investment. The investment must be in designated areas known as Low Income Communities. The various types of properties to identify are commercial real estate development and renovation, opening of new businesses, expansion of existing businesses or expansion of businesses already in the (OZ) Opportunity Zone. Certain tax rules do apply and your local Commercial Real Estate professional and CPA should be lock in step with the regulations.

The certainty Ben Franklin spoke of is true and, with these advantages, it does not delay the inevitable. Hopefully, in the coming years the low income communities will benefit as well. This is to be determined.

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