Defining Qualified Opportunity Zone Property
- Posted: March 20, 2019
- Posted by: Travis Lynk
- Last Reviewed: March 20, 2019
Under the Opportunity Zone program, Qualified Opportunity Funds may invest in three different types of Opportunity Zone property to qualify for tax incentives: stock in an Opportunity Zone business, partnership interests in an Opportunity Zone business, or tangible Opportunity Zone business property.
Business property, for the purposes of the Opportunity Zone program, is real estate or other tangible real property that may be necessary to operate a business.
Qualified Opportunity Funds investing in qualified Opportunity Zone business property must meet the following three requirements:
1. The property must be acquired after December 31, 2017. Any real or tangible property purchased by the fund prior to that time does not meet the requirements for qualified Opportunity Zone business property. For example, if the fund purchased a partially vacant strip mall on December 29, 2017, it would not qualify as Opportunity Zone business property.
2. The property must be put into service at the same time as the start of a new qualified Opportunity Zone business. In the example above, if a fund acquired the strip mall on January 1, 2018, it would still not qualify if the strip mall planned to operate asis. On the other hand, if the fund planned to develop a new commercial property on a parcel of land located within an Opportunity Zone, this would qualify as Opportunity Zone business property.
3. The property must be substantially improved by the fund within 30 months. Looking at the strip mall example again, if a Qualified Opportunity Fund renovates and improves the property by turning it into office space for new business startups, the propertycould potentially qualify as an Opportunity Zone business property as long as the cost of the improvements equaled or exceeded the purchase price of the property.