Opportunity Zone Investments: Why Basis and Valuation Documentation Matter

What Qualified Opportunity Zones Are

Established under the Tax Cuts and Jobs Act, Qualified Opportunity Zones allow investors to defer and potentially reduce capital gains tax by reinvesting proceeds into a Qualified Opportunity Fund that invests in designated low-income census tracts.

Basis and the Substantial Improvement Test

To qualify, a fund generally must substantially improve acquired property by investing an amount exceeding the property's adjusted basis in improvements within 30 months. An appraisal supporting a defensible land-to-improvement allocation at acquisition is often central to demonstrating this test is met.

Valuation at Contribution and Disposition

Investors may need an independent value opinion both when property is contributed to a fund and when it is ultimately sold, to support the reported basis and gain calculations relied upon for the investment's tax treatment.

Why Independent Documentation Matters

Given the complexity and evolving guidance around Opportunity Zone rules, a well-documented, independently supportable valuation reduces risk if the investment's tax treatment is later reviewed.

Dunkin Advisors supports Opportunity Zone investors with independent valuations at acquisition and disposition. Contact us to discuss your investment, ideally in coordination with your tax advisor.

Compliance Note: This article is provided for general educational purposes only and does not constitute legal or tax advice. Property tax exemption standards and procedures vary by jurisdiction. Organizations should consult their local tax assessor's office and, where appropriate, qualified counsel regarding a specific application.