What are the requirements and what if my property is leased?
If it is located in an approved Opportunity Zone, then it must be acquired by an Opportunity Zone Fund to qualify for any of the Opportunity Zone benefits. The fund is the key. And you generally don't create your own fund unless you have that need or the expertise. Your asset might be more appealing to an Opportunity Zone Fund by virtue, because of its location is likely the main advantage.
Do you currently have a Qualified Opportunity Fund (QOF) or Qualified Opportunity Zone Business (QOZB)? If yes, there are three requirements for your property to be considered as an OZ business property: 1) The property must be acquired by a QOF or QOZB purchase or lease from an unrelated party after Dec. 31, 2017 2) Either (i) The original use of the property in the OZ commences (for depreciation purposes) at purchase or (ii) The QOF or QOZB substantially improves the property (test met if during any 30 month period beginning after the date of acquisition, additions to the basis of the property exceed an amount equaling the portion of the property value allocated to existing buildings at the beginning of the 30 month period) 3) During substantially all 90% of the QOZB's holding period for the property, substantially all 70% use of the property must occur in an OZ. So long as the QOF or QOZB is able to meet these requirements, qualification is automatic. If you do not have a QOF or QOZB currently, you will not be able to have your property to be considered as an OZ business property because of the related party requirement, and thus unable to enjoy any benefits by having it qualify as OZ business property.
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