Topic: Discussion of Opportunity Zones with no capital gains taxes in the US (Read 341 times)

The law is linked upthread. It has been dug through. The key word is not 'corporations' it is 'taxpayer'. As in, inclusive of individuals and LLCs.

This topic is more of Economics to me than legal but on a second look its just might be right here as we are talking about the law that has been enacted and how blockchain startups can take advantage of it. Firstly, I think its a good one to want to encourage development in certain areas of the country and identifying and admitting leaving this to the hands of government might not happen in a lifetime because most times, concentration is always on the major cities that diplomats and foreign nationals will only visits. It then falls back to the private sector to take the bold step and develop the areas concerned. Over here too, there is some form of incentive for businesses that invest in areas where some basic facilities have not been provided by government in a way of tax incentives.

For crypto related start ups, I think there is still more need to understand the details of the law if it makes provision for that and also understand what is required of them to be eligible for the tax incentive because I don't expect a crypto start up which just have a branch of their office or just apartment to run their online activities to be eligible. So, in essence there is need to do more understanding by employing the services of professional lawyers before taking the decision to set up business based on face value information.

This has been implemented in other countries recently as well to try and stimulate new business. I think Russia, Turkey, Germany, and a handful of Latin American countries have created special economic zones so corporations can build factories on the cheap.

Key word there is corporations. I'm not sure if these tax benefits apply to individuals or limited liability companies. You'd have to dig through the law itself with a keyword search to find out for sure.

In regards to cashing out, depending on how strict the tax laws are enforced in Puerto Rico, there's a chance you can live off of those gains without declaring them as personal income. Or make a "service payment" to another entity in bitcoin (yourself)

Sadly the ones who will get to benefit the most are the companies willing to set up shop in these so-called "O-zones", freeing up a considerable amount of tax-burden in exchange for locally hiring people in these low income areas is sort of a win-win scenario for them. They get to have their normal business running just by employing local residences (hoping that it will boost their economy and decrease unemployment rate) plus they have a big tax cut on the local tax deduction. Sadly for willing local entrepreneurs in that area who don't have any capital to begin with will have little chance to benefit their own area being classified as a O-zone, this tax benefit are really meant for the big companies to lure them in that specified "O-zones"

wow, just wow

land I was already interested in is located smack in the middle of an OZ


I think I might need a tax attorney

Take a look at this page, might be helpful. I think this is the first available o-fund for investing in.

https://fundrise.com/opportunity-fund

I believe that you are incorrect. As long as you have not had a taxable event (i.e. cashed out), your cost basis is irrelevant.

If you think I am mistaken, a cite would be helpful.

But you still have to pay taxes on those capital gains. Only the capital gains you accrue after officially becoming a resident become tax free.

I think they just set 2026 as an expiration date of the law.

I don't think that is true:

(c) Special rule for investments held for at least 10 years
In the case of any investment held by the taxpayer for at least 10 years and with respect to which the taxpayer makes an election under this clause, the basis of such property shall be equal to the fair market value of such investment on the date that the investment is sold or exchanged.

Of course, IANAL. I don't understand how this interacts with the 2026 date.

Takes half-year+1day to establish residency. Not too onerous, for someone sitting on a pile of cap gains. Not by half.

Thanks for that. From the FAQ, it appears that one may be a passive investor in a Qualified Opportunity Fund, and get all the tax benefits of creating your own business in an Opportunity Zone.

The benefit I see here is that one Bitcoiner who has a great idea for a biz on an OZ, but requiring more capital, may be able to bring in other Bitcoiners with no particular entrepreneurial spirit in as silent partners, and all would gain the tax advantages.

From the FAQ:

Q. Do I need to live in an Opportunity Zone to take advantage of the tax benefits?
A. No. You can get the tax benefits, even if you don’t live, work or have a business in an Opportunity Zone. All you need to do is invest in a Qualified Opportunity Fund.

I researched Puerto Rico quite thoroughly a while ago. I think it ended up being 0% capital gains taxes all the way around.

The problem is, you still pay full capital gains taxes on anything you've purchased up to the point of becoming a resident. It's only the capital gains taxes you accrue after becoming a resident that are tax free.

On a side note, so in Puerto Rico, you still pay taxes on stuff outside of the Island. So the only 'real' advantage is, from what I understand, no capital gains taxes.

But on the other hand,  Puerto Rico has a Commonwealth tax, but I can't seem to get a handle on what the covers. Also local and sales taxes.

others? Anyone else researched this and can whip some numbers at me to compare?

unlikely to act on this (coward) but curious

brad

+/2

It would need to be industrial and concrete AF. As solidly constructed as a prison cell. Homeless in the us would be far less respectful towards private property than the Japanese and it would need to stand up to daily pressure washing with scalding water. Also we don't need to conserve space QUITE as much as in Tokyo. But yea. Those capsule rooms from Tokyo were my original inspiration for the idea.

I should ICO it. Tokens could entitle one to one night of use. No need to even share profit or anything.

At one point I considered building a bar out in middle of nowhere. Part of my idea was to have such rooms (for the drunks so they don't have to drive home).

Have some sort of plastic covering for the bed and such. It's just a pod that you slip into, then once you leave it sprays it down. You check out your blanket I suppose. Or figure that part out another way.

Something like this?




As for starting an actual business that I thought would profit in one of these zones...you might as well ask me to start a business in a communist country. There's a reason they're run down. Their governments have run them to the ground and chased away anybody seeking to make a profitable business long ago. They'd be glad to have their next suckers to drain.

Well there's my answer. Gay. You couldn't put bitcoin ATMs in these places. They would get robbed like every day.

---

I actually do have one other business idea that I've been mulling around for a while that would be particularly suited for these sorts of areas. An idea for how to house people at a rate that the homeless could afford and would prefer to the street. Basically a very small room that essentially worked like the inside of a dish washer, so that you wouldn't need to pay staff for cleaning, coupled with leveraging biometrics and reputation to ensure that customers couldn't get away with too much abuse of the facilities.

What do you guys think? I can never tell if I'm a genius or completely mad.

No, I wasn't looking at something special for crypto.

What most early adopters face is very large capital gains. There was much discussion about this near the peak with many new millionaires not wanting to end up paying hundreds of thousands of dollars to the IRS with the sale of some of their bitcoins.

The reason to look at this Opportunity Zone law is that you can defer all of the gains you gain from selling your bitcoins if you invest those gains into a business in one of these zones (potentially). And the reason to open your own business is that you can invest all of your gains into your own business which can be "Jim's Lambo store" which does nothing but sell Lambos (on paper) but has not yet sold any Lambos, but the owner of the store drives the only Lambo available in the store (purchased tax free from bitcoin gains that would have otherwise been a check to the IRS to funnel off to ISIS).

Here is the FAQ from the IRS:

https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions

And the actual law:

https://www.law.cornell.edu/uscode/text/26/subtitle-A/chapter-1/subchapter-Z

Any idea if I could put the headquarters of a bitcoin ATM company in an economic zone and claim it that way or would all of the actual ATM machines themselves have to be in economic zones too? I actually have been thinking about starting a little bitcoin ATM business for a while.

In addition, the "opportunity funds" you'd be investing in appear to grow tax-free, forever, and they can be restructured without losing their status. So, they're essentially treated like retirement accounts -- no taxes paid until you withdraw the gains. I can't run the numbers, but quite a lot of compounded growth is possible with this structure, because they operate tax-free.


Yeah, AFAIK there's no way to apply or take advantage of these tax breaks with regard to past crypto investments. To me, this whole scheme is more about gentrification and pouring tax-free gains into real estate developer coffers.

reply to WO post here:
https://bitcointalksearch.org/topic/m.42822472


still seems like a good place to park some money for a while, with the chance to actually help the underdogs somewhere. making some money from it helps of course.

not a lot around my area but still. gotta do some more research obviously. gonna mention it to my financial guy next time i seem him.

Looking at the article what I understood is that, there is no change in the laws of company formation. So you can form a company in these zones by following the existing state law. However, the tax burden will be slowly diminishing allowing you to have increased profits over a span of few years. The main goal is to revitalize the backward communities and provide oxygen to the existing and potential industry formation.

However, I could not find any mention about bitcoin or cryptos here. That essentially means, you need to follow the existing federal guidelines that are there for crypto related investments. Company formation is obviously possible with greater level of tax reduction but for crypto, I don't think any special provisions have been given.

Well that sucks.

I'll stick to waiting for the inevitable collapse.

Upon closer inspection it appears that it only defers taxes for 8 years and then reduces them by a paltry 15%. I mean it could be really good if you already had a business idea that would work well in a low income area but purely as a tax avoidance scheme, seems questionable.

When you dump your US citizenship you have to pay the exit tax which is a few thousand dollars plus capital gains taxes on everything you own as if you had sold it when you left. Without actually selling it.

My thought is that I can just draw out $35k per year to live on until the US implodes and there's no need to dump my citizenship.


Or....find the hole in this Opportunity Zone thing and buy a 100 sqft box with an address and open a "business" to funnel more than just $35k through. When I get around to actually reading the law that passed. There are a few deserted lots in the Texas Opportunity Zones that are probably very cheap.

As an aside, when the seastead gets up and running, and you decided to locate there permanently, are you going to dump your US citizenship? Will French Polynesia offer citizenship?

It sounds like it'll probably gentrify the shit out of poor neighborhoods and force residents out, while allowing developers and investors to avoid paying taxes. So I'm thinking, yeah, maybe you could dump a bunch of BTC gains into real estate in a dumpy neighborhood, renovate your crack houses and quadruple the rents over 10 years, and pay literally no taxes on the gains as long as they're deemed part of an approved "opportunity fund." Sounds like a real sweetheart deal.


Just keep building that bubble!

The problem is that the gains you'd make by investing in these shitholes are unlikely to compete with the gains made by bitcoin over the same time period, even taking into consideration the tax differences.

Not likely.

Europeans can just leave their country and not owe taxes. Not so much for US citizens.

Quick question to get it out of the way, is this in any way useful to europeans?

My first question is.

Can I create a startup in one of these zones then invest bitcoins into the company which then needs a company boat for me to go travel around the world for the company?

https://www.forbes.com/sites/forbesdigitalcovers/2018/07/17/an-unlikely-group-of-billionaires-and-politicians-has-created-the-most-unbelievable-tax-break-ever/


"The heart of this new law: Opportunity Zones, or "O-zones," low-income areas designated by each state. Investors will soon be able to plow recently realized capital gains into projects or companies based there, slowly erase the tax obligations on a portion of those gains and, more significantly, have those proceeds grow tax-free. There are almost no limits. No limits on how much you can put in, how much tax you can avoid and, for most of the country, the types of taxes you can avoid, whether federal, state or local. No limits on how long those proceeds compound tax-free. And precious few limits on what types of investments you can make."

Let's dig into this new tax law and figure out how bitcoiners with high capital gains can take advantage of this legal gift from Washington.