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How can my QOF hold land for investment purposes and receive OZ benefits?

I am not ready to start developing my land yet but don’t want to miss out on any OZ benefits.


Answers
  • Valerie Grunduski
    November 16, 2020

    The indirect method, having the QOF own interest in a lower tier QOZB which holds the land allows for usage of a 31 month (or more) working capital safe harbor. Using this method, you can contribute cash into your QOF and utilize a written business plan that shows how you intend to invest the proceeds into development over the safe harbor period without failing the test. You will need to consult a professional to be sure you won't have issues with how the land is currently titled and there is also some risk as it relates to whether the property is a qualified asset before you improve it.

  • Guy Nicio
    November 16, 2020

    Holding for investment does not qualify. You must clearly have a development plan that is reasonable and that is executed within 31 months.

  • Matthew Rappaport
    November 16, 2020

    You can ride out your compliance grace periods (for instance, the mulligan on the first six-month testing period) and that's about it. Other than that, QOFs and QOZBs must be running a trade or business to remain compliant.

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