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Real Estate Series Part 6: How Opportunity Zones Create Tax-Free Wealth
Discover how Opportunity Zones let investors legally defer, reduce, and even eliminate capital gains taxes. Learn how to create your own Qualified Opportunity Fund, meet improvement rules, and turn smart real estate investing into long-term, tax-free wealth with insights from The Hidden Money Podcast.
What We Cover
Turning Taxes Into Opportunity
If you could sell a business, cash out of your stocks, or offload a rental property, and keep nearly every dollar working for you instead of handing it to the IRS, would you? That’s exactly what Opportunity Zones were designed to do.
These special investment areas offer one of the most powerful tax strategies in the U.S. code: the ability to defer, reduce, and even eliminate capital gains taxes while growing your wealth through real estate or business investment.
In this episode of The Hidden Money Podcast, Mike Pine and Kevin Schneider uncover how Opportunity Zones work, what’s changed under the 2025 One Big Beautiful Bill, and why this incentive isn’t just for the ultra-wealthy or big developers. From understanding the 180-day reinvestment window to creating your own Qualified Opportunity Fund, this guide breaks down how investors are using Opportunity Zones to turn tax burdens into long-term, tax-free wealth.
What Is an Opportunity Zone?
An Opportunity Zone (OZ) is a government-designated area identified as “economically distressed” based on census data. When you invest in these areas through a Qualified Opportunity Fund (QOF), you receive major tax incentives designed to encourage private investment and community growth.
Originally created under the Tax Cuts and Jobs Act of 2017, Opportunity Zones have now been made permanent under the One Big Beautiful Bill, expanding access and simplifying the rules.
For investors, that means one thing: unprecedented flexibility to reposition capital gains and grow wealth tax-advantaged for decades to come.
How Opportunity Zones Reduce and Eliminate Capital Gains
Opportunity Zones offer a three-layered tax advantage, deferment, reduction, and elimination that's unmatched by almost any other IRS program.
1. Immediate Tax Deferral
When you sell an asset (stock, real estate, or a business) and realize a capital gain, you can defer paying taxes on that gain by reinvesting it into a Qualified Opportunity Fund within 180 days. This allows your money to keep working instead of being sidelined by a tax bill.
2. Partial Reduction of the Original Gain
Hold the investment for at least five years and you can permanently exclude up to 30% of the deferred gain from taxes. That’s not a delay, that’s a reduction of what you’ll ever owe.
3. Tax-Free Growth on Appreciation
Keep the Opportunity Zone investment for ten years or more, and any new appreciation, the profit earned after your initial investment, can be sold 100% tax-free.
Imagine selling $1 million in stock, investing it through a QOF into an Opportunity Zone property, and selling it ten years later for $3 million. That extra $2 million? Completely untaxed.
Opportunity Zones vs. 1031 Exchanges
Many investors compare Opportunity Zones to 1031 exchanges, but they serve different purposes.
- A 1031 exchange only applies to real estate and requires a like-kind property swap under strict timelines.
- An Opportunity Zone investment can originate from nearly any capital gain — stocks, crypto, or the sale of a business — not just real estate.
And unlike a 1031, investors can take cash out after five or ten years without penalty while still enjoying the tax benefits.
Opportunity Zones are essentially a more flexible, broader version of a 1031 exchange, ideal for investors looking to diversify out of volatile assets or move from equities into tangible property.
How to Create Your Own Qualified Opportunity Fund
You don’t have to invest in a massive institutional fund. Mike and Kevin emphasize that any investor can create their own Qualified Opportunity Fund (QOF) through an LLC or partnership structure.
This approach gives you control over:
- The type of property you buy or build
- The improvement plan and timeline
- The long-term strategy for holding or selling
A husband-and-wife partnership, for example, could sell a business, roll the gains into a QOF, and purchase land or a rental property inside a qualifying zone — all while deferring taxes and setting up future tax-free growth.
The “Substantial Improvement” Requirement
The IRS doesn’t want passive investors simply sitting on land. To qualify for tax benefits, your Opportunity Zone investment must show substantial improvement within a defined period.
That typically means:
- Doubling your basis (the property’s value) within 18 months for most zones, or
- Improving by at least 50% in designated rural Opportunity Zones.
Common qualifying improvements include building new structures, major renovations, adding new amenities like pools or guest suites, or upgrading mechanical systems to increase property value.
Example: Investing $1 million in Broken Bow, OK, a qualifying rural zone, to build or renovate luxury short-term rentals could check all the boxes: real improvement, community investment, and long-term appreciation.
Step-by-Step: How Opportunity Zone Investing Works
- Trigger a Capital Gain: Sell stock, property, or a business for a profit.
- Form or Join a Qualified Opportunity Fund: You have 180 days to roll your gains into a QOF.
- Invest in a Qualified Zone: Buy or build within a designated area.
- Improve the Asset: Complete qualifying improvements within 18 months.
- Hold: Five years = partial tax reduction. Ten years = tax-free sale.
- Report Annually: Stay compliant with new self-certification and fair-market-value reporting rules.
Why This Tax Strategy Works So Well in 2025 and Beyond
Under the One Big Beautiful Bill, Opportunity Zones have been made permanent and expanded, allowing more areas to qualify. New designations will open again in 2026, meaning investors can find attractive emerging markets across the U.S.
The new law also tightened reporting to prevent abuse, requiring investors to show genuine community impact. That’s good news for serious investors who want to operate above board and benefit from the long-term, compounding power of tax-free growth.
Who Should Consider Opportunity Zone Investments
Opportunity Zones are ideal for:
- High-income earners looking to defer taxes on large stock or asset sales
- Business owners planning to reinvest after a sale
- Real estate investors seeking a tax-efficient diversification strategy
- Families building multi-generational wealth through legacy properties
You don’t have to be a developer to use this tax strategy, you just need smart structuring and professional guidance to make sure every step qualifies.
Turn Your Next Tax Bill Into a Wealth Strategy
Opportunity Zones prove that the tax code isn’t your enemy… it’s a roadmap. With the right structure, you can take a gain that would have been taxed at 20% or more and convert it into a long-term, tax-free wealth-building tool.
If you’re ready to explore whether an Opportunity Zone strategy fits your financial goals, talk to the experts who do this every day.
Schedule your free consultation today at revotaxpayer.com Let Mike Pine and Kevin Schneider help you create your Qualified Opportunity Fund, structure it properly, and build a plan that keeps more of your money where it belongs, with you.
00:00:16:43 - 00:00:40:07
Mike Pine
Welcome to this episode of Hidden Money. This is episode six of our real estate series. Kevin and I are so excited to talk to you about something called Opportunity Zones. It's not a new term. It was new in 2016, but it's a bigger and better term after the One Big Beautiful Bill act passed earlier this year.
00:00:40:07 - 00:00:45:35
Kevin Schneider
Yep, yep. And this Opportunity zones are an opportunity.
00:00:45:40 - 00:00:46:22
Mike Pine
Huge.
00:00:46:27 - 00:01:03:49
Kevin Schneider
For tax purposes, for deferring and even eliminating very few times in the tax code. Can you actually eliminate tax. Typically it's the permit game. But we are getting going to be able to eliminate taxes in real estate using opportunity zones.
00:01:03:57 - 00:01:24:58
Mike Pine
So if you hear a CPA or tax advisor or a podcaster saying something like you can only deferred taxes, you can never eliminate the recognition of taxes. Let's move on. And here's one way you can do it without having to die. Yes. So opportunity zones were originally part of the Tax Cut and Jobs Act of 2017, and they were very wonky.
00:01:25:03 - 00:01:42:39
Mike Pine
They came out with this artificial date of 2026. The basics were we don't need to give too much in the basics of the unknown because the law, the new law is much better. But the old law said, hey, if you invest in an opportunity zone, and what we're going to do is we're going to create all these opportunity zones throughout the country.
00:01:42:44 - 00:01:50:53
Mike Pine
And the point of this is, is to try to incentivize investments in economically distressed areas. And when you hear that, don't
00:01:50:53 - 00:02:09:40
Mike Pine
think about investment because some of these economically distressed areas are incredible investment places. But the point was to try to get people to buy and build businesses or improve businesses inside economically distressed areas. So when they originally came out with that, that was a brand new part of the tax law.
00:02:09:42 - 00:02:29:52
Mike Pine
We had to wait two years. It was until 2019 that we started getting final regulations from the Treasury Department on, which was almost already too late because what it said is, hey, if you have a game, they would have to pay tax on this year, we'll give you 180 days to invest it in Qualified Opportunity Zone Fund, which is invested in the opportunity of qualified opportunity.
00:02:29:52 - 00:02:58:31
Mike Pine
So if you do that, we will likely defer recognizing any tax on that game or any income and paying tax on that game for seven years. But you'd have to do it seven years before December 31st, 2026. And these rules didn't come out to 2019. So you're already we're out of time. They said if you held it for seven years, then you'd only have to recognize 85% of the gain after seven years, or if you held it for five years and 20.
00:02:58:36 - 00:02:59:00
Mike Pine
So
00:02:59:00 - 00:03:19:19
Mike Pine
that ended in 2021. If you had for five years, you could defer 10% of the game permanently and then recognize the rest. That's just one part. The next part is if this is an opportunity zone and you meet all the qualifications. Once, but you have to say you buy a business for $1 million, you deferred that game for $1 million.
00:03:19:23 - 00:03:34:19
Mike Pine
I'm generalizing here, but let's say you buy it for $1 million each for that game for five years or seven years. You recognize part of that game, let's say 25 years later, you sell that part business or that real estate business for $10 million.
00:03:34:24 - 00:03:35:02
Kevin Schneider
It's a big game.
00:03:35:12 - 00:03:39:47
Mike Pine
Big game, tax free, completely tax free.
00:03:40:01 - 00:03:47:39
Kevin Schneider
If you get into an opportunity zone. So these opportunity zones they it's a census done. Is it a census I think it's a
00:03:47:39 - 00:03:48:39
Kevin Schneider
it's
00:03:48:39 - 00:03:55:43
Kevin Schneider
data that they that your local jurisdiction does or you're is it Congressman. Not so the House or something else.
00:03:55:52 - 00:04:01:38
Mike Pine
Congress is allowing all the states, the states, their governors or assemblies, they get to decide and say who.
00:04:01:38 - 00:04:02:07
Mike Pine
Yeah.
00:04:02:07 - 00:04:17:15
Mike Pine
To designate up to a certain amount of opportunity zones in their state, and they have to meet three different qualifications in the detail that basically that census tract that they're designating has to meet one of these three criteria.
00:04:17:19 - 00:04:43:32
Mike Pine
One of them is the average salary or the average annual income of the people that live in that census tract. Our 70% used to be it used to be 70. Now it used to be 80. Now it's 70 or 70%. Their average income of 70% of what the average income is for the metro area or that state. So what could be poor consider poor in an opportunity zone in New York might not make it Louisiana.
00:04:43:32 - 00:05:04:00
Mike Pine
So they're all over the place right now. We have almost 9000 opportunities. They changed the rules, made a little harder to qualify this year under this new rule. And they're coming out with new opportunity zones. It's either June 30th or July 30th of 2026 next year. And we expect there to be about 7000. And this law was made permanent.
00:05:04:00 - 00:05:14:09
Mike Pine
Now it doesn't expire in in nine years like the last one does. It's permanent. And every decade the states are allowed to designate more opportunity zones.
00:05:14:23 - 00:05:36:01
Kevin Schneider
Yeah. And one area that we we constantly bring up is broken bow. Just because broken bow Oklahoma the populate the population there generally. Don't be offended if you're listening in Broken bow. Generally according to the census data, the population there that lives there has lower income, but the people in Broken Bow who live there are driving the income down.
00:05:36:01 - 00:05:39:35
Kevin Schneider
But there's a very strong short term rental market in Broken.
00:05:39:35 - 00:05:40:58
Mike Pine
Bow.
00:05:41:03 - 00:06:01:51
Kevin Schneider
Properties in the millions. So you're having million dollar high end properties in Broken Bow that are in opportunity zone. So that's kind of the opportunities. Hence the word opportunities that you could find is I could take my gain from another asset or another business sale that I've captured that I'm recognizing I can move that gain into this opportunity zone.
00:06:01:51 - 00:06:19:42
Kevin Schneider
And this isn't like a 1031. This is an actual fun that you create, that you create a partnership. And this is the work that we do behind the scenes. But we would walk you through all the creation of the fund. But that gain is not going to be paid tax on for five years at all.
00:06:19:51 - 00:06:46:17
Mike Pine
And after five years you're only going to pay 90% that gain or this new thing that came out this year, I mean 70% again, you get a 30% permanent deferral with the qualified rule opportunity zone, a new term created in the bill, the one big beautiful bill at let me back up for a second, but so back in the when the opportunity zones were first created in 2017, most people didn't understand them.
00:06:46:21 - 00:06:47:18
Kevin Schneider
And
00:06:47:18 - 00:06:50:33
Kevin Schneider
there's a new concept. There's nothing like it in tax law. At the point we.
00:06:50:33 - 00:06:51:31
Mike Pine
Were looking for guidance.
00:06:51:41 - 00:06:57:59
Kevin Schneider
Yes. Like you got to create a fund. You deferring but you're recognizing there's a hold period. And it was very hard.
00:06:58:17 - 00:07:30:31
Mike Pine
But there were some funds or a lot of funds that popped up and said we are qualified. Opportunity zone fund, invest with us, defer your gains. The cool thing is it's like unlike a 1031, you got 180 days. You can collect the money and then decide within 180 days later, put it in an opportunity zone fund. But a lot of these funds popped up and I've seen more people, and maybe there's some good operating funds out there that made money, but I don't think I've met a client that has made money on the qualified members, even to the de zone fund established by some big company.
00:07:30:36 - 00:07:38:55
Mike Pine
But you don't have to invest in a big fund. You can create your own fund. I kind of hate that part. I thought they were going to fix that. Like, why should I have to
00:07:38:55 - 00:07:39:07
Mike Pine
create a.
00:07:39:07 - 00:07:39:48
Kevin Schneider
Bunch of tape?
00:07:39:48 - 00:07:40:21
Mike Pine
I'm investing
00:07:40:21 - 00:07:46:39
Mike Pine
in a business. Creating business opportunities. Oh that's dumb. Yeah. I thought they say something to me. Yeah, but you can create your own fund.
00:07:46:53 - 00:08:06:57
Kevin Schneider
And don't be scared about the term fund, because it's not like you're registering with the SEC and all this kind of stuff. It is literally a husband and wife can go into business together, create a partnership, create a fund. And then we file all the fair market value valuation, paperwork. Inside that partnership, we get everything lined up inside the partnership.
00:08:06:57 - 00:08:17:54
Kevin Schneider
That partnership is the fund. Then it kicks off a K-1 to your personal tax return. So even you let's say you are a family owned business, husband, wife, own business. You sell your business, you can still
00:08:18:00 - 00:08:27:16
Kevin Schneider
in business together and buy a rental property. Defer that gain, eliminate pieces of it. Then we can cost segregate that property even more.
00:08:27:16 - 00:08:44:48
Kevin Schneider
So you're not paying tax on the sale. Then we can cost segregate at full fair market value or do a purchase price allocation. And you could do both. You could double dip. You can defer the gain eliminate a piece of it. But also tax playing with that new rental property.
00:08:44:48 - 00:08:59:22
Mike Pine
Because not only are you deferring the gain, you'd be creating tax benefits today. Maybe eliminating your taxable income that year. And then if you hold that property for ten years or more, you sell it. It's tax free. So I actually.
00:08:59:28 - 00:09:04:04
Kevin Schneider
Get into that a little bit more because there's some there's some hurdles in there that we need to kind of go over a little
00:09:04:04 - 00:09:20:51
Kevin Schneider
bit because it it's not, it's not as simple as just buying and holding this broken bow property for ten years and then selling it. Yeah, there has to be some work. So if you think about this from the government standpoint, they're trying to find distressed areas, quote unquote distressed low income areas.
00:09:21:02 - 00:09:41:59
Kevin Schneider
They want to incentivize. Remember the Internal Revenue Codes and incentive based system. We preach on this all the time. There's chock full of incentives in the Internal Revenue Code. This is one of them. They want to incentivize outside money investors to invest into these quote unquote distressed areas and improve them, not just buy and just sit on a property.
00:09:41:59 - 00:10:04:26
Kevin Schneider
You have to improve the property to a certain extent. And then if you're improving the property, making it better, hence making the community better, property taxes are going up. The you can see kind of the government's move here is they're incentivizing you to go into these areas and make them better for living conditions. And then if you hold on to that property for the set amount of years, you've improved the property a set amount, I think it's doubled the basis.
00:10:04:55 - 00:10:06:33
Mike Pine
I get that said, yeah,
00:10:06:33 - 00:10:07:20
Mike Pine
yeah.
00:10:07:25 - 00:10:20:43
Kevin Schneider
Or half the base depending on if it's rural. Yeah. So if you buy $1 million property and it's not the rural, purchase, it's just a short term rental and broken. But I just going to keep using broken bow just because.
00:10:21:04 - 00:10:24:21
Mike Pine
It's you qualify as a rural and broken. But but we won't know until next year anyway.
00:10:24:21 - 00:10:24:34
Mike Pine
Yeah.
00:10:24:34 - 00:10:35:13
Kevin Schneider
When the maps come out. So at that point, if you buy $1 million property, you have to improve that property, double its basis over the ten year period.
00:10:35:14 - 00:10:36:21
Mike Pine
Oh, at 18 months.
00:10:36:32 - 00:10:39:52
Kevin Schneider
Oh, I thought it was ten years basis. Oh, okay.
00:10:40:10 - 00:10:59:06
Kevin Schneider
I hope you're enjoying this episode of the Hidden Money podcast. I just wanted to bring to your attention that we have an an amazing tax firm, that we practice what we preach on this podcast. It's taxpayer advocacy. You can Google us or just go to Revo taxpayer.com. When you go there, you can schedule a free consultation with either Mike or I.
00:10:59:06 - 00:11:11:15
Kevin Schneider
We want to personally talk to you and get to know you and see if we can't just get back as much tax dollars in your pocket as possible. So revo taxpayer.com. All right. Back to the episode.
00:11:11:15 - 00:11:12:43
Kevin Schneider
That's a lot of capital.
00:11:12:43 - 00:11:13:05
Mike Pine
There
00:11:13:05 - 00:11:23:07
Mike Pine
it is. But for you this you go by a real lot and broke about $300,000. You build a house for $300,000 day.
00:11:23:07 - 00:11:23:21
Kevin Schneider
There you.
00:11:23:21 - 00:11:23:48
Mike Pine
Go.
00:11:23:48 - 00:11:40:33
Mike Pine
You can put let's say let's do it 505 hundred. Right. To make it easy for me because I'm not the numbers guy like you are. So you go by, let's say you have $1 million game that you want to defer. I know a lot of people right now, they're enjoying highs in the stock market, but they want to diversify.
00:11:40:33 - 00:11:58:07
Mike Pine
I was just talking to a client the other day. He has $5 million of Microsoft Talk that he got in about 40 bucks. And he wants to diversify out of it, but he doesn't want to pay all that tax. He doesn't want to be all I. Okay. Take $1 million to sell $1 million a game of the stock market.
00:11:58:07 - 00:12:29:50
Mike Pine
Diversify create an opportunity zone zone fund. Put your million dollars in within 180 days. Gone by a $500,000 lot, build a $500,000 house on it within 18 months, and you don't pay any taxes on that game for five years, and then either you paid taxes on 90% of it. If it's not considered a qualified roll opportunity zone, or you paid 70% of the taxes you would pay if it is after five years, hold onto it so you get $1 million in this property.
00:12:29:55 - 00:12:37:51
Mike Pine
Hold on to it for ten years and turn around. Sell it for $3 million. Now, you know, $2 million of game tax for for life.
00:12:37:51 - 00:12:55:58
Kevin Schneider
That's great. And the appreciation doesn't scare you on the property. You have a now you have $1 million property. You hold on to it for ten, 15, 20 years. It's probably worth two and a half, 3 million maybe. And depending on that area, maybe, maybe a million and a half, who knows. But you can sell that rental property tax free.
00:12:56:03 - 00:12:58:37
Kevin Schneider
It's nothing like it in the Internal Revenue Code. And
00:12:58:37 - 00:12:59:31
Kevin Schneider
let's say.
00:12:59:36 - 00:13:19:49
Mike Pine
You're only allowed to shelter or increase your basis over a 30 year period. So after you've only if you hold on a property for 30 years, let's say you're stuck 40 years after 30 years, that's what your basis is. You can't keep getting the fair market value I agree. So let's say you buy those million dollar property 30 years from now, it's worth 10 million.
00:13:19:54 - 00:13:26:19
Mike Pine
And then you sell 40 years for 15. Well, now you can have a $5 million taxable income over $9 million.
00:13:26:28 - 00:13:27:35
Kevin Schneider
Yeah that's great.
00:13:28:15 - 00:13:37:46
Kevin Schneider
It is really cool. And to find these opportunity zones, what I do is I just go to Google and I type in opportunity zone map. There's going to be a.gov website at the very
00:13:38:00 - 00:13:41:32
Kevin Schneider
front of your search. You can actually go into it. Make sure it's a.gov.
00:13:41:32 - 00:13:45:39
Kevin Schneider
And you go into there and you can put in zip codes, you can put in addresses.
00:13:45:48 - 00:14:04:09
Kevin Schneider
So let's say you do have a large business gain this year. And you're like, well I kind of want to get into real estate. 1031 exchange does not work if you're selling a property or not a property, but a business. Let's say we sell our CPA firm. I can't 1031 my CPA firm into real estate. It's not like kind.
00:14:04:09 - 00:14:27:15
Kevin Schneider
It has to be real estate to real estate. And there's similar, similar industry. So we can't do that. But in an opportunity zone it's almost like a back door. 1031 in this instance is because I could take my gain from selling my business, put it into this opportunity zone and not pay tax. So go to the map and make sure that before you do your next rental purchase, check the map.
00:14:27:17 - 00:14:27:31
Mike Pine
You'd be
00:14:27:31 - 00:14:51:49
Mike Pine
shocked. Like there's cost there. I was just working with the client last week in South Padre Island. There's a place right off there that's a census tract that qualifies. And if it's a qualified rural opportunity zone and the way it's defined in the in the the one big beautiful bill that is anywhere in the area that's an average or has a population of less than 50,000, which I suspect now I'll be real, I suspect broken by.
00:14:51:49 - 00:14:58:21
Mike Pine
Well we'll see. Then you only have to improve or increase your basis by 50% over
00:14:58:21 - 00:15:06:40
Mike Pine
the next 18 months. So you buy a $750,000 property. You only have to improve it by 3 or 75,000.
00:15:06:45 - 00:15:07:14
Kevin Schneider
Man,
00:15:07:14 - 00:15:07:53
Kevin Schneider
that's great.
00:15:07:57 - 00:15:08:38
Mike Pine
This is exciting.
00:15:08:38 - 00:15:28:30
Kevin Schneider
Stuff. Yeah. And even let's say you didn't do the raw land and it's hard to improve the basis. You can always add a pool. And now I don't know if this needs to make business sense. Yes. So but we also want to make sure we stay in this opportunity zone the correct way. So you can add a wing to the property.
00:15:28:30 - 00:15:51:38
Kevin Schneider
You're increasing the value. You can add a bedroom. You can add a guest suite. You can add some landscape, some some backyard remodel stuff gets expensive. So make sure you have the available capital to improve the property. And you're not just thinking short term. Okay, I got my money into a fund and I bought the property. Step two I do have to improve the property a set amount depending on if it's rural or not.
00:15:51:38 - 00:16:10:59
Mike Pine
So when you're looking at a property, first of all, when you have a gain to show, look at the gain and the time determine are able to find a real opportunity zone or regular opportunity zone. But you put all the money in the fund within 180 days of experience in that game. Then you go find the property and just make sure you're doing the math.
00:16:10:59 - 00:16:17:54
Mike Pine
If you're in a normal opportunity zone, I'll use half the money to buy the property, and have the other half available to use in the next 18.
00:16:18:04 - 00:16:18:52
Kevin Schneider
Yeah. Use debt.
00:16:18:57 - 00:16:19:15
Mike Pine
Be real
00:16:19:15 - 00:16:38:16
Mike Pine
estate. You can go buy dry cleaner, car wash, go buy a car wash. It's not being used. That could be used a lot if it had new, newer, improved equipment. But it's run down and it's a perfect location. It's not automated. Go buy one of those and put an all new equipment in it and be printing out cash offset your income.
00:16:38:20 - 00:16:56:10
Mike Pine
Another cool thing though is you don't have to use gain money, right? All right. So let's say we don't and it has to be capital. You can't take a game like your W-2 income and shelter for five years. It has to be capital gain or capital gain type gains that you're deferred. But let's just say we don't have any gains this year.
00:16:56:10 - 00:17:21:59
Mike Pine
And Kevin and I have a stand up here. Between the two of us. We make half $1 million this year and we want to go buy a short term rental. We can go do that broker, but we're not offsetting taxes this year or in one of these other opportunity zones, we're offsetting taxes. But as long as again, we improve the property within 18 months, as required, hold on there for ten years so it tax free.
00:17:22:00 - 00:17:29:34
Kevin Schneider
We're not deferring money into it, but we're getting the the back end, the exit tax advantaged by selling our property tax free.
00:17:29:34 - 00:17:36:09
Mike Pine
You know. So this shows that axiom when they say the only cost of life is death and taxes.
00:17:37:00 - 00:17:37:25
Kevin Schneider
No.
00:17:37:30 - 00:17:39:19
Mike Pine
Cost, that you just need a better tax.
00:17:39:20 - 00:17:39:46
Kevin Schneider
And
00:17:39:46 - 00:17:48:18
Kevin Schneider
that's right. That's 100% true. That's 100% true. Well, that's opportunity zones. Do you have any. I think we hit on a pretty
00:17:48:18 - 00:17:49:57
Kevin Schneider
from a very high level.
00:17:50:12 - 00:17:50:31
Mike Pine
There's so
00:17:50:31 - 00:18:13:46
Mike Pine
many details and specifics need to go into. I'll just add a few more details. They did make in this one big, beautiful bill that they made a little more complicated to do the reporting on this. So don't just go willy nilly and buy an opportunity zone. Think you're fine? Find someone that knows the rules, or come work with us, because you got to create the opportunity zones before you contribute the capital into it.
00:18:13:46 - 00:18:34:36
Mike Pine
And go buy the property. That has to be done every year, and you have a special self-certification and report. You have to file with that return. The way the reason for that, I kind of kind of like it. I don't like the additional complexity, but they're trying to prove Congress have created created this entity. So this is not just a tax shelter.
00:18:34:36 - 00:18:58:35
Mike Pine
This is actually to help improve economically distressed areas. So they're having to report things like the increase in fair market value, the amount of business you did. And there you're reporting that to one of the federal government bureaus, not the labor statistics, one of them having to report it to. And they're required starting in 2031, that agency to give a report and show how much and how well this is working.
00:18:58:40 - 00:19:00:27
Mike Pine
Can you believe that? Yeah. What ability.
00:19:00:42 - 00:19:02:30
Kevin Schneider
In our government.
00:19:02:35 - 00:19:04:09
Mike Pine
Or tax law in our government.
00:19:04:09 - 00:19:05:33
Kevin Schneider
Is crazy.
00:19:05:33 - 00:19:21:48
Kevin Schneider
It's nothing like it. There's nothing like a qualified opportunity zone. It's very cool. And you get is still like we said earlier, you still get to take advantage of purchase price allocation or cost seg. So even if you had some ordinary income or some W-2 income, but you had some gain that were sheltered, we could do both.
00:19:21:53 - 00:19:22:54
Mike Pine
And so
00:19:22:54 - 00:19:39:54
Mike Pine
I'm just gonna give two examples of two different, clients I've spoken to the last two months where this made perfect sense, and they're getting the best results. Right. So one example, there's, a client we had that bought a bunch of Tesla stock when it was, well, they are no longer politically aligned with Elon Musk.
00:19:39:54 - 00:19:56:32
Mike Pine
They want to sell their Tesla stock. And they have they sold it when when they thought it was at the high. They have 180 days to do this opportunities. I don't think they're going to be able to. And it was a lot of money, and I'm talking more than a few million that he sold. That's a lot of money.
00:19:56:32 - 00:20:03:26
Mike Pine
So we're working together and hopefully I'm going to get this opportunity zone created. This doesn't mean as my but if he does, this is what we're going to do. Or
00:20:03:26 - 00:20:03:39
Mike Pine
take
00:20:03:39 - 00:20:12:37
Mike Pine
that 3 million plus box, put in the Opportunity Zone fund, buy the property and you actually can extend that longer. You don't have to buy the property with 180 days.
00:20:12:39 - 00:20:13:52
Kevin Schneider
It's not like six and 30.
00:20:13:57 - 00:20:34:30
Mike Pine
Yeah, there are similar rules, but we don't exactly know what they are yet. Like you probably should have an identified property in a couple of replacements just in case. That's how they follow the rules. But go find the property. But he's thinking of storage. Self storage. So go buy this land. And he actually thinks he might have a piece of land in a trust in his family.
00:20:34:30 - 00:20:47:02
Mike Pine
He can buy it from the trust fund to do a certified appraisal. So there's no self-dealing going on. And then build the storage units. Boom. He's just avoid paying taxes on $3 million of capital gain for five.
00:20:47:10 - 00:20:47:39
Kevin Schneider
Years, and he's
00:20:47:39 - 00:20:55:55
Kevin Schneider
moved into real estate and investment he no longer was aligned with now into a controlled asset that he can manage and manage himself.
00:20:57:08 - 00:21:23:21
Mike Pine
And then again, the whole period, he sells it for tax free. It's family is doing quite well, but he didn't do anything to eliminate additional income this year. He just deferred his gain this year. So another client similarly, a bunch of Rs who's vested few million dollars, they're recognizing in income this year and, and we're able to get the eight three be filed and it's capital gain.
00:21:23:36 - 00:21:43:29
Mike Pine
So he's got this capital gain. He's trying to do it with a vacation rental and bust board to improve it in the same year, which is gonna be hard. I think he can do it. It's going to be hard. But if he does that now, he was able to offset his W-2 income this year to further recognition of his capital gains for five years.
00:21:43:33 - 00:21:58:29
Mike Pine
And then again, turn around. So so it's just there's so many different ways you could do this. You don't have to do it by yourself. You don't have to have a husband, a wife. You can have one person create a fund by creating an LLC. You know, I'm in a partnership and it all sees a GP of their own, a partnership.
00:21:58:34 - 00:22:02:40
Mike Pine
You can have a group of people do this, I think. Kevin, you and I need to own up to it.
00:22:02:51 - 00:22:20:59
Kevin Schneider
Yeah. And we're going to be helping. We help all of our clients with the actual form filing, the partnership fund filing. We handle all of that. So go to Revo taxpayer.com click on schedule a consultation. And Mike and I would love to speak to you about the potential of doing an opportunity zone. So thank you for tuning in to this episode.
00:22:20:59 - 00:22:22:29
Kevin Schneider
We'll catch you next week.
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