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Does the development of new condo buildings compatible with the OZ incentive?

If you syndicate funds to buy land and develop a new multi-unit condo building in an OZ, is this compatible with the incentive?


Answers
  • Brad Cohen
    October 14, 2020

    Yes, but the sale of condos will be taxable.

  • Matthew Rappaport
    October 14, 2020

    Not really. Funds with condo inventory typically want to flip long before the ten-year OZ holding period has elapsed. Funds also don't want to do rent-to-own to ride out the holding period. Condo inventory is not eligible Section 1031 property, so you can't even extend the holding period by doing a 1031 into a different project. It's a tough sell. It's not totally impossible, but it'll take some real gymnastics. I typically tell clients that condo development is not the best thing to do in an OZ.

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