Ask HN: Are you thinking about investing in an Opportunity Zone?
I won't pretend to know all the details about startup tax treatment, but I think it could be relevant for a lot people who are coming out of startup acquisitions and are suddenly liable for significant capital gains taxes. Here are two scenarios:
Default:
- Joe the engineer's startup is purchased by BigCo, leaving Joe with a $1M worth of stock options.
- Joe decides to sell the options and buy a house. He pays roughly $300K of CG tax and buys a house worth $700K.
- Joe lives in the house for 10 years and then decides to retire to the countryside. Over that time, the house has doubled in value. Joe realizes another $700K of capital gains when he sells the house which corresponds to $200K of CG tax, so after all is said and done, his net worth is $1.2M.
OppZone:
- Same initial story, but immediately after Joe sells his options, he uses the money to buy a house in an Opportunity Zone.
- Joe pays no CG tax on the option sale, so he buys a house for $1M.
- After 10 years, the house doubles in value, and Joe decides to sell and retire.
- He now pays CG tax on the initial option sale, but no tax on the increase in home equity. So his value after all the transactions is $1.7M, a $500K difference.
https://eig.org/opportunityzones/about
https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions