Happy Friday. This is the Shake 🤝 : the 5-minute weekly newsletter that’ll spice up your real estate game the same way developers spiced up this Miami intersection

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Here’s what we've got for you this week:

• Will The Real Scott Stallings Please Stand Up?

• The Tax Hack: Opportunity Zones

• Trump's Ex-Wife's Burial Site Tax Play?!?

MARKET RADAR

WILL THE REAL SCOTT STALLINGS PLEASE STAND UP?

On New Year’s eve, Scott Stallings, a 60-year-old real estate agent in New York received an invitation to participate in this year's Masters.

As you can probably imagine, to be a part of arguably the biggest golf tournament of the year comes with quite the invitation. You would think Augusta National, an extremely exclusive and prestigious golf club, would know exactly which address to send an invitation to for their most substantial event.

Instead, the 54th-ranked player in the world, also Scott Stallings, who had “literally been checking the mail 5 times a day” received a DM from the non-pro Stallings. Also, get this, their wives' names are Jenny and Jennifer - I guess the multiverse just might exist.

Anyways, the two had a conversation, and the PGA pro invited the real estate agent to come down for dinner and the practice round of the Master’s this April. Now that's a stand-up guy!

Wonder if Scott will use his doppelgänger next time he’s in the market to buy some real estate. Wait, then non-pro Scott could essentially write off that Masters trip?!

(Disclaimer: we are not CPAs)

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THE TAX HACK: OPPORTUNITY ZONES

There are three things in life that are certain - death, taxes, and The Shake giving you free game 🤝

What if we told you there’s a way to avoid mean old Uncle Sam? And that Uncle Sam himself is the creator of the program - meaning it’s legal and he’s totally cool with it!

No seriously, there is a massive tax shelter out there for investors, and the savviest of them all will be rolling in tax-free dough because they are helping transform some of the most blighted areas across the US.

These properties are classified as being in a Qualified Opportunity Zone (QOZ). QOZs present massive opportunities to investors and there's no reason why you shouldn’t participate before it ends in 2026. Let’s get you up to speed…

First, have you ever seen a listing and noticed it said the property is in an Opportunity Zone (OZ)? This doesn't mean it’s automatically a great deal and that you should buy it but it does mean that with the right strategy, you can take advantage of some of the best tax benefits the US government has to offer.

OZ investing can get VERY complex but that’s why we’re going to dumb it down (not saying you’re dumb 😉🤝 )— so how does it work?

Queue the formal jargon: The Opportunity Zone program offers investors that pay U.S. taxes (individuals, partnerships, corporations, foreign investors) certain tax benefits for rolling over their realized capital gains into a Qualified Opportunity Fund (QOF). A QOF is an investment vehicle that files either a partnership or corporate federal income tax return and is organized for the purpose of investing in QOZ property.

What the heck does that mean? In our words, the OZ program allows anyone that had a capital gain (sold a stock, business, home, or even crypto for a profit) to move their capital gain dollars into an LLC type entity (QOF) that will later on invest those dollars into developing or rehabbing real estate that resides inside an opportunity zone in the US.

Ok, what are the tax benefits of dealing with all these damn acronyms?

Here’s the overall process simplified:

• Sell something for a capital gain 💰

• Put gain in an OZ Fund (QOF) 🏦

• You still owe taxes on that initial gain but defer payment to 2027 🕰

• QOF must invest in OZ property 🏚

• Stay in QOF for 10+ years ⏳

• NO TAX due on the new profit or depreciation recapture 🤑

Now let's go through an example to show the lifecycle of an OZ deal from a passive investor.

Say you bought 10 bitcoin in 2017 and sold them in 2022 for a $500K profit. You now have to pay capital gains tax (~20%) in 2023 for that profit - a damn shame, right?

The old you would pay that $100K tax bill in 2023 and have $400K sitting around for your next investment that is susceptible to yet another tax hit on future capital gains (if the investment is successful).

The new you says screw paying that $100K tax bill now and instead writes a $400K check to invest as an LP (Limited Partner) with an operator that specializes in OZ deals and has a QOF already set up - saving you the hassle. *There’s a small catch here, you only have 180 days to write that check into the QOF from when you realize that gain so don’t wait around!

That $100K you were going to pay to Uncle Sam in 2023 is now only $20K (20% of the $100K capital gain you didn't invest into QOF) and you can now put $80K in a treasury bill earning you 3-5% per year until 2027 when the rest of the capital gain is due. Who doesn’t love free money?! This is still the tip of the iceberg though so stay with us.

That GP (General Partner) you trusted with your money is living up to the hype. They found a great deal and developed a multifamily building in 24 months.

After 2 more years, the property appreciates nicely and the GP pulls the trigger on a refinance to distribute a lump sum back to investors. Depending on the success of the deal so far, you can get anywhere from $100K-$300K back on that initial $400K. That’s tax-free money that you can pull out or roll into another OZ deal 🔁 - that's when the snowball starts happening.

Besides that, you'd already been receiving quarterly distributions from the property's cash flow and get depreciation benefits to offset your passive income 🤯

Now it's about time (2027) to pay that initial cap gains tax hit, and you decide to pull out your money from the treasury bill and use $80K to wipe that out with leftover cash to spare.

Fast forward 6 more years and the property sells for a 2.5x ROI. Your $400K allocation pays you back $1MM PROFIT 💸. No capital gains tax needs to be paid this time around.

Name us a better way to keep Uncle Sam at bay... we'll wait 😎

NON-POLITICAL: TRUMP'S EX-WIFE'S BURIAL SITE TAX PLAY?!?

Guys, we’re a real estate newsletter. We don’t care who you voted for and we most certainly aren’t going to push any narratives here. This story fueled a heated debate at The Shake's (virtual) office this week, so we wanted to get everyone’s opinion after this tweet surfaced 👇

Naturally, political correspondent and certified public accountant, Joe Budden, jumped on a podcast to speak very matter-of-factly about Donald Trump burying his ex-wife at Trump National Golf Club in Bedminster, New Jersey.

“Donald Trump buried his ex-wife at his golf course… why this is interesting… is because apparently doing so has tax benefits… His golf course is now a cemetery…”

Budden continues “ Defining a golf course as a cemetery can grant a business a whole raft of tax breaks…[according to] New Jersey Law, land being used for cemetery purposes is exempt from real estate and personal property taxes, as well as sales tax, inheritance tax, business tax, and income tax… Cemetery property is also exempt from sale for collection of judgements… With cemetery trust funds and trust income exempt from both tax and sale or seizure for collection of judgements against the company.”

Of course this caused people to want to dig into if this actually happened, and if this actually was possible. In all reality, this is a juicy story no matter which way you cut it.

Turns out it was a clickbait story that Bloomberg Tax quickly “wrote off” 😉

“While the decision by members of the Trump family to be laid to rest at Trump National Golf Club Bedminster may be puzzling to those of us on the outside, the research shows there is no loophole being taken advantage of at the time of this writing.”

I’m sorry but all I can think of when I hear Budden comment on things like this is Dave Chapelle’s bit about the news station calling Ja Rule to have him weigh in on tragic breaking news - IYKYK.

And that’s a wrap! We hope you enjoyed this week's edition.

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