OZ MAGAZINE 2022 Top 25 Influencers issue 2.2 - Page 16
16 OPPORTUNITY ZONE MAGAZINE | ISSUE 2 • VOLUME 2
SUPER CHARGE YOUR OZ AFTER-TAX IRR WITH COST
By Valerie Grunduski , Gordon Goldie and Jeremy Sompels
Why cost segregation is enhanced in Opportunity Zones and can be beneficial for QOF investors .
The Opportunity Zone ( OZ ) incentive was created to attract investment in specific low-income census tracts . Investor benefits include deferral until 2026 of capital gains invested in a Qualified Opportunity Fund ( QOF ), exclusion of 10 % of deferred capital gains invested in a QOF for at least 5 years by 2026 , and exclusion of gains upon exit from the QOF investment after a 10 + year hold . The 10-year gain exclusion applies to both gains from appreciation as well as depreciation recapture . Since depreciation is not recaptured upon exit to the extent that the OZ 10-year exclusion applies , utilizing a cost segregation study can super charge a QOF investor ’ s after-tax internal rate of return ( IRR ), as explained below .
WHAT IS COST SEGREGATION ?
• Cost segregation is a process that identifies substantial taxsavings opportunities for taxpayers that have purchased ,