dsmWealth March 5, 2020

A 124-room hotel is taking shape in the Opportunity Zone facing Drake University.

Dramatic Developments Rising in Opportunity Zones

BY STEVE DINNEN

Iowa’s Opportunity Zones are seeing tens of millions of development dollars flow into them, finally unleashing the economic power anticipated with the creation of these tax-favored investment opportunities.

Nelson Development of Des Moines is soon to open a multimillion-dollar, 124-room Home2 Suites by Hilton hotel that it is building on University Avenue, across the street from Drake University’s Old Main. Just to the east of the hotel, Nelson is considering whether to build a mixed-use apartment and retail building.

Both of those projects lie smack dab inside one of 62 so-called Opportunity Zones in Iowa that were created as part of 2017 federal tax legislation. They offer some generous tax benefits that defer capital gains taxes—or even eliminate them (finally, a way to beat the tax man)—for qualifying investors.

The hotel is using Opportunity Zone investments, while a decision on that funding mechanism is not yet set on the mixed-use project (and at the hotel, there is money involved that is not tied to rollover money from a Zone decision). But basically the Zone investment option is a decision made by the investor. The best tax break for this endeavor comes about from selling an appreciated investment, then putting all of the proceeds into a qualifying Zone project. Any capital gains that would be due from the sale of the appreciated asset are deferred, and if held long enough, the investor gets a stepped-up cost basis equal to whatever sale value is eventually obtained.

Across the street from Nelson, but also in the second of two Opportunity Zones awarded Des Moines, Merge Urban Development of Cedar Falls is planning an extensive renovation of property around the now shuttered Varsity Theater. The Varsity will be refurbished, but buildings around it will be razed to make way for at least four low-rise apartment buildings. Retail shops will be included by Merge, which specializes in Zone works and already has smaller projects going in Iowa and Wisconsin.

"This investment is going to bring new business, new residents and new energy to the neighborhood," Drake President Martin Marty said last year in announcing the Merge deal.

And in Mason City, a South Dakota developer has broken ground on a $15 million housing project in a Zone there—a former city-owned parking lot.

The beauty of the legislation is that any investor can invest in any project in any Zone. Iowa residents can tap into any of hundreds of projects underway nationwide. And non-Iowans can certainly bring their investment dollars to Iowa’s Zones.

Clarifying the Timeline for Donations from an IRA

BY STEVE DINNEN

Let’s set the record straight as far as the timeline goes on a QCD coming from an IRA. That’s a qualified charitable distribution (sometimes called a charitable rollover), coming out of an individual retirement account. It’s a great way to transfer money directly from your IRA to a charity—and avoid an income tax liability on that payout.

Recent radio ads touted a change in the law governing these payments, saying that they can be made tax-free once you hit age 72. Wrong. As was past practice, you can still make a charitable payout at age 70 1/2.

The confusion (those ads have stopped) may have occurred because the law changed the age at which IRA owners must take mandatory minimum distributions. It used to be 70 1/2 but was lifted to 72.

Once you hit age 72 you have to take that required minimum distribution, or face a confiscatory penalty. And here’s where the QCD steps in, as it allows you to give the money instead to a qualifying charity and satisfy the distribution requirement.

Make sure the money goes directly to the charity, without first touching your bank account. Otherwise, it will be treated as a distribution. Even then, all is not lost, tax-wise, as you can still take a deduction for a donation as long as you itemize your taxes.

Stock Market Corrections: How Long? How Bad?

BY THOMAS FRANCK for CNBC

The U.S. stock market fell into correction territory last Thursday as investors punished equities in favor of safer assets as anxiety over the spread and potential impact of the virulent coronavirus.

A correction is defined as a 10% decline in one of the major U.S. stock indexes, typically the S&P 500 or Dow Jones industrial average, from a recent 52-week high close.

History shows these corrections last another 3% and take about four months to recover, on average. But there’s one big caveat. This is only if it does not fall into bear market territory, down 20% from a high. If the losses stretch to 20%, then there’s more pain ahead and a longer recovery time. >> READ MORE

What It Means to Invest With a Gender Lens

BY BETH PINSKER for REUTERS

When clients tell financial adviser Catherine Valega that they want to invest their money in women, they are not always clear what they mean.

To be honest, there is no real answer yet. If you have less than $1 million, investing with a gender lens typically means buying shares in mutual funds or exchange-traded funds that pick stocks with the goal of advancing the interests of women. For direct investments in women-led firms or businesses focused on women’s issues, you have to meet the high minimum investments of impact venture capital funds.

There are now some 35 options of gender lens funds. Total assets invested in gender account for $2.4 billion, according to a 2018 report on gender lens investing from Veris Wealth Partners. That is up from eight options and just $100 million four years ago. In contrast, there are 10,000-plus other funds in the general market. >> READ MORE