Five percent, no exceptions; do not pass Go, do not collect $200, etc. This part of the OZ rules is very unforgiving.
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How much of the aggregate unadjusted tax bases of the property of a QOZB can be attributable to nonqualified financial property?
Is this flexible? Does it have any exceptions I can use?
Answers
5% of the of the aggregate unadjusted tax bases of the property of a QOZB can be attributable to nonqualified financial property. Interestingly, this 5% limitation is tested based upon the “average of” the aggregate unadjusted tax bases of the property of a QOZB. No guidance has been provided on when this average is computed.
Not more than 5%. This amount does not include a reasonable amount of working capital. There is always the working capital safe harbor that will provide 31 months (more in certain cases) to invest the proceeds received from a QOF.
In a Qualified Opportunity Zone Business Fund (QOZB), nonqualified financial property must be less than 5% of your assets. Unless you have amounts that can be shown to qualify as reasonable working capital.
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