Ideal Kukui’ula Opportunity Zone Offering

Kukui’ula Kaulu Homesite 61, with its community design review approved plans, may be the ideal Opportunity Zone property currently offered in the south Kauai Opportunity Zone.

Kaulu Homesite 61 is listed for $895,000 with design review approved plans – MLS 626369. Adjacent Kaulu Homesite 62, a furnished vacation home, sold for $3,800,000 in March 2018.

Kaulu Neighborhood Homesite 61 in Kukui’ula

The Kaulu Homesite 61 is currently listed for sale for $895,000, including community design review approved plans, and is located in the 85-homesite Kaulu Neighborhood where seven-day renting is permitted.

The adjacent Kaulu Homesite 62, a 4-bedroom, 3.5-bath home with private swimming pool, sold for $3,800,000 in March 2018 and is currently offered as a seven-day rental home from $1,150/night by local property manager, Alekona Kauai.

Virtually the same home as the Kaulu Homesite 61 proposed plan (with minor design adjustments such as the swimming pool) was constructed on nearby Kaulu Homesite 66, then furnished and offered as a 4-bedroom, 4-bath vacation rental home with private swimming pool by local property manager, The Parrish Collections Kauai, until the property sold for $3,200,000 in September 2018.

Kaulu Homesite 66 4-bedroom, 4-bath vacation home sold for $3,200,000 in September 2018.

Kukui’ula Qualified Opportunity Zone

The Qualified Opportunity Fund buyer may choose to purchase the vacant Kaulu Homesite 61, and retain:

1. A local general contractor to build the proposed 4-bedroom, 4-bath Kaulu Homesite 61 home with private swimming pool,
2. A local interior designer to furnish the home as a vacation rental property, and
3. A local property manager to begin producing vacation rental business income within 30 months, in order to comply with the applicable IRS Opportunity Zone provision, Sec 1400Z-2.

The buyer of Kaulu Homesite 61 may choose to make changes to the exterior such as the paint colors and roofing material, which would require approval from the community’s design review board, as well as choose interior finishes with no design review board approval necessary.

Opportunity Zone Program Update

In October 2018, the IRS published proposed regulations providing direction taxpayers had been looking for, however many questions remained. This month the IRS sought to address many of the questions by publishing a second set of proposed regulations.

Sec 1031 Exchange versus Opportunity Zone Investment

I was reading an article on Forbes.com written by Tony Nitti, CPA with a Masters in Taxation, about the recent changes to the Opportunity Zone provisions, and this statement comparing a Sec 1031 exchange with Opportunity Zone investment caught my interest:

“A taxpayer is not required to reinvest the entire proceeds from the sale or exchange giving rise to the eligible gain; rather to defer the full amount of eligible gain, the taxpayer must reinvest only the gain amount. Thus unlike a Sec 1031 exchange, a taxpayer reinvesting in a QOF (Qualified Opportunity Fund) can both take cash off the table and defer the full amount of the gain resulting from the sale.”

It will be interesting to follow the IRS publications as the department interprets 26 USC section 1400Z-2 applications developed by tax specialists.

Please contact your tax specialist to determine how these new tax incentives may possibly work for you.

Looking for Opportunity Zone property on Kauai?

Contact me — Lori Decker, Kauai Opportunity Zone specialist.

The Plantation House at Kukui’ula is the ‘ha’ of the private South Shore Kauai community