The GO Zone Investment
Real Estate Investing in the Gulf Opportunity Zone
An Overview of the Gulf Opportunity Zone Act of 2005
- August 29th, 2005 - Hurricane Katrina makes landfall in the Gulf Region. Massive devastation ensues.
- December 16th, 2005 - Congress passes H.R. 4440, Gulf Opportunity Zone Act of 2005.
- This legislation amends the IRS code to establish a program of tax benefits for businesses and individuals affected by Hurricane Katrina, Hurricane Wilma and Hurricane Rita.
- Allows a 50% bonus depreciation allowance for GO Zone non-residential real property and residential rental real property placed in service before December 31st, 2008.
- This legislation amends the IRS code to establish a program of tax benefits for businesses and individuals affected by Hurricane Katrina, Hurricane Wilma and Hurricane Rita.
- December 21st, 2005 - President Bush signs the Gulf Opportunity Zone Act of 2005.
- January 24th, 2006 - The IRS releases Publication 4492 which provides information such as special depreciation allowance for qualified Gulf Opportunity Zone property.
- Qualified GO Zone States including Parishes and Counties according to www.FEMA.gov
- Special 50% Bonus Depreciation Allowance Rules from IRS Publication 4492.
- You can take a special depreciation allowance for qualified Gulf Opportunity Zone property you place in service after August 27, 2005. The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). The special allowance applies only for the first year the property is placed in service.
- You can take a special depreciation allowance for qualified Gulf Opportunity Zone property you place in service after August 27, 2005. The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). The special allowance applies only for the first year the property is placed in service.
- Qualified GO Zone Property
- Nonresidential real property and residential rental property.
- Nonresidential real property and residential rental property.
- Other Tests To Qualify as GO Zone Property.
- You must have acquired the property, by purchase, after August 27th, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005.
- The property must be placed in service before 2009 in the case of nonresidential real property and residential rental property.
- Substantially all of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the GO Zone.
- The original use of the property in the GO Zone must begin with you after August 27, 2005.
- The property must be new when you purchase it to qualify for GO Zone Benefits.
- You must have acquired the property, by purchase, after August 27th, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005.
- Our Professional Analysis
- We have painstakingly studied the guidelines for the GO Zone. Our analysis is NOT to be considered tax or legal advice. Please consult you appropriate tax/legal professional concerning the GO Zone.
- The GO Zone 50% Bonus Depreciation Allowance benefits investors who qualify as a Real Estate Professional under IRS guidelines. (see The Real Estate Professional Test below)
- Real estate trades or businesses are defined by statute as: Any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.
- Real Estate Professionals may include investors who have purchased over 5 properties and/or $1,000,000 in rental real estate and participates in the active management of the properties.
- Those who are not real estate professionals are subject to the $25,000 Special Rental Real Estate Allowance under IRC section 469.
- So, in a nutshell, you (or if you are married, one spouse) must pass this test below... then we feel confident you can effectively utilize the GO Zone 50% Bonus Depreciation Allowance.
- We have painstakingly studied the guidelines for the GO Zone. Our analysis is NOT to be considered tax or legal advice. Please consult you appropriate tax/legal professional concerning the GO Zone.
- The Real Estate Professional Test
- First Test: Are more than half of all personal services in all businesses for the year performed in real property and rental real estate for at least one spouse (taxpayer)?
- Second Test? Does the taxpayer spend more than 750 hours in real property businesses and rentals in which he/she materially participates?
- For further explanation see IRS IRC Sec. 469 (c)(7)