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Supercharge your OZ after-tax IRR with cost segregation

February 22, 2022 Article 7 min read
Authors:
Valerie Grunduski Gordon Goldie Jeremy Sompels

Tax experts Valerie Grunduski, Gordon Goldie, and Jeremy Sompels shared their thoughts on how cost segregation studies can supercharge a Qualified Opportunity Fund investor rate of return.

Business professional using a handheld tablet device with a presentation on a screen in the background.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 five years by 2026, and exclusion of gains upon exit from the QOF investment after a more than 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 supercharge a QOF investor’s after-tax internal rate of return (IRR).

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