Under the Act, prospective investors are incentivized to sell appreciated property and to reinvest the gains into qualified Opportunity Zone projects.
How can investors take advantage of these new tax savings? First, it is necessary to invest in a QOF. A QOF is an investment vehicle that is set up as either a partnership or a corporation for investing in eligible property located within a designated Opportunity Zone.
For property to qualify as Qualified Opportunity Zone Property, it must be acquired after December 31, 2017 from an unrelated person and either: the first use of the property is in the Opportunity Zone, or there must be a “Substantial improvement” of the property.
In addition to real estate itself, Qualified Opportunity Zone Property can include tangible property and buildings owned by and used in a trade or business of the QOF. Qualified Opportunity Zone Property may also include the stock or partnership interest in a Qualified Opportunity Zone Business, if the stock or partnership interest is acquired after December 31, 2017.
A qualified business is a business entity based in an Opportunity Zone with “Substantially all” of its tangible business property qualifying as eligible property using the same rules and limitations discussed above regarding a Fund’s direct ownership of Qualified Opportunity Zone Property.
Property is “Substantially improved” by a QOF if during any 30-month period after the property is acquired, additions to the tax basis of the property are made that equal or exceed the adjusted basis of the property at the time of acquisition.
Although not specifically set forth in the Act, it is likely that regulations will prohibit leasing Qualified Opportunity Zone Properties such businesses, as well.
Originally Published on February 25, 2019 at 10:03PM
Article published originally via “opportunity zone” – Google News https://www.jdsupra.com/legalnews/the-tax-benefits-of-investing-in-63550/