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M.com Z O THE DREW K KERVICK CK dkervick@dunkielsaunders.com SHANNON L NON LENZINI slenzini@DRM. Eligible Business Entities Investm tments i ts in n Operating ng Qualified Bus Businesses Opportunity Fund Eligible Business


  1. M.com Z O THE DREW K KERVICK CK dkervick@dunkielsaunders.com SHANNON L NON LENZINI slenzini@DRM.

  2. Eligible Business Entities Investm tments i ts in n Operating ng Qualified Bus Businesses Opportunity Fund Eligible Business Entities Form of Investment Qualified Opportunity Zone Business A. Tangible Property i. QOZBP QOZ Stock in QOZ Partnership Interest B. Intangible Property Corporation in Partnership* C. 50% Test D. NQFP E. Sin Businesses The Opportunities * Includes membership interest in a limited liability company taxed as a partnership

  3. Form of Investment • The stock or partnership interest in the business must be Investm tments i ts in n acquired by the opportunity fund: Operating ng • After December 31, 2017 ; • At its original issue from the business; and Bus Businesses • Solely in exchange for cash . Eligible Business Entities Form of Investment Qualified Opportunity Zone Business A. Tangible Property i. QOZBP B. Intangible Property C. 50% Test D. NQFP E. Sin Businesses The Opportunities

  4. Investment in a Qualified Opportunity Zone Business • Must be a qualified opportunity zone business at the time Investm tments i ts in n the equity is issued (or, if a new business, it must be organized for the purpose of being a qualified opportunity Operating ng zone business); and Bus Businesses • Must remain a qualified opportunity zone business for substantially all (90%) of the opportunity fund’s holding Eligible Business Entities period. Form of Investment “Substantially All”? Qualified Opportunity Zone Business A. Tangible Property i. QOZBP B. Intangible Property C. 50% Test D. NQFP E. Sin Businesses The Opportunities

  5. What is a “Qualified Opportunity Zone Business?” A. Tangible Property Test: Substantially all (70%) of the Investm tments i ts in n business’s tangible property (including leased property) must be qualified opportunity zone business property . Operating ng Bus Businesses “Substantially All”? Eligible Business Entities Form of Investment Qualified Opportunity Zone Business A. Tangible Property i. QOZBP B. Intangible Property C. 50% Test D. NQFP E. Sin Businesses The Opportunities

  6. What is a “Qualified Opportunity Zone Business?” (cont’d) Qualified Opportunity Zone Business Property: Tangible property used in a trade or business if: Investm tments i ts in n 1. It was acquired by purchase from an unrelated party after Operating ng December 31, 2017 Businesses Bus 2. During substantially all (90%) of the business’s holding period for such property, substantially all (70%) the use is in a Qualified Opportunity Zone Eligible Business Entities Form of Investment Special Rule regarding Inventory: Inventory (including raw Qualified Opportunity Zone Business materials) of a business does not fail to be “used in a qualified opportunity zone” solely because the inventory is in transit. A. Tangible Property i. QOZBP B. Intangible Property C. 50% Test D. NQFP E. Sin Businesses The Opportunities

  7. What is a “Qualified Opportunity Zone Business?” (cont’d) 3. Original use in the QOZ commences with the Qualified Opportunity Zone Business Investm tments i ts in n OR Operating ng Qualified Opportunity Zone Business substantially improves the Businesses Bus property during any 30-month period after acquisition. Eligible Business Entities “Substantially Improves”? Form of Investment Qualified Opportunity Zone Business A. Tangible Property i. QOZBP B. Intangible Property C. 50% Test D. NQFP E. Sin Businesses The Opportunities Additions to basis exceed an amount equal to the adjusted basis of such property at the beginning of such period (Think: Double it )

  8. What is a “Qualified Opportunity Zone Business?” (cont’d) Investm tments i ts in n B. Intangible Property Test. Substantial portion (40%) of intangible property used in active conduct of Operating ng business . Bus Businesses “Substantial portion”? Eligible Business Entities Form of Investment Qualified Opportunity Zone Business A. Tangible Property i. QOZBP B. Intangible Property C. 50% Test D. NQFP E. Sin Businesses The Opportunities

  9. What is a “Qualified Opportunity Zone Business?” (cont’d) Investm tments i ts in n C. 50% Test: At least 50% of income derived from Active Conduct in the Opportunity Zone. Operating ng Bus Businesses Eligible Business Entities Form of Investment Qualified Opportunity Zone Business A. Tangible Property i. QOZBP B. Intangible Property C. 50% Test D. NQFP E. Sin Businesses The Opportunities Active Conduct does not include triple-net-leasing.

  10. What is a “Qualified Opportunity Zone Business?” (cont’d) Investm tments i ts in n 50% Test Safe Harbors: Operating ng 1. If at least 50 percent of the services performed (based on hours) Bus Businesses for such business by its employees and independent contractors (and employees of independent contractors) are performed within the qualified opportunity zone. Eligible Business Entities Form of Investment 2. If at least 50 percent of the services performed for the business by its employees and independent contractors (and employees of Qualified Opportunity Zone Business independent contractors) are performed in the qualified A. Tangible Property opportunity zone, based on amounts paid for the services i. QOZBP performed. B. Intangible Property 3. If (1) the tangible property of the business that is in a qualified C. 50% Test opportunity zone and (2) the management or operational D. NQFP functions performed for the business in the qualified opportunity E. Sin Businesses zone are each necessary to generate 50 percent of the gross income of the trade or business. The Opportunities If no safe harbor can be satisfied, then facts & circumstances test.

  11. What is a “Qualified Opportunity Zone Business?” (cont’d) Investm tments i ts in n 4. Less than five percent unadjusted basis of property is Operating ng nonqualified financial property . Bus Businesses Nonqualified Financial Property : debt, stock, partnership interests, options, futures contracts, forward Eligible Business Entities contracts, warrants, notional principal contracts, Form of Investment annuities and other similar property. Qualified Opportunity Zone Business Does not include reasonable amounts of working capital A. Tangible Property held in cash for up to 31 months pursuant to a written plan. i. QOZBP B. Intangible Property C. 50% Test Written plan for planned use of working capital may include the development of a trade or business in the D. NQFP qualified opportunity zone as well as acquisition, E. Sin Businesses construction, and/or substantial improvement of The Opportunities tangible property.

  12. What is a “Qualified Opportunity Zone Business?” (cont’d) Investm tments i ts in n 5. Can’t be a “Sin Business”: Operating ng i. A private or commercial golf course Bus Businesses ii. Country club, Eligible Business Entities iii. Massage parlor, Form of Investment Qualified Opportunity Zone Business iv. Hot tub facility, A. Tangible Property v. Suntan facility, i. QOZBP B. Intangible Property vi. Racetrack or other C. 50% Test facility used for gambling, or D. NQFP E. Sin Businesses vii. Any store the principal business of which is the sale of The Opportunities alcoholic beverages for consumption off premises.

  13. Large Expansions of Existing Businesses Investm tments i ts in n Operating ng Bus Businesses Eligible Business Entities Form of Investment New Businesses Qualified Opportunity Zone Business A. Tangible Property i. QOZBP B. Intangible Property C. 50% Test D. NQFP E. Sin Businesses Real Estate Development and Rehabilitation The Opportunities

  14. ONE TAKEAWAY Real al Es Estate Investment nts One Takeaway New activity in your town? It Pre-Regulations almost certainly fits into the OZ Examples Structures program! Role Playing Conclusion

  15. Pre-Regulations Three Basic Approaches : Real al Es Estate Investment nts 1. Buy a building and renovate it One Takeaway Pre-Regulations 2. Buy new equipment Examples Structures 3. Buy land and put a new Role Playing building on it Conclusion

  16. EXAMPLES I Purchase/lease new equipment and use it Real al Es Estate Purchase new equipment and lease it to a business Investment nts One Takeaway Pre-Regulations Examples Structures Purchase used equipment that has not been used in your zone Role Playing Conclusion

  17. EXAMPLES II Buy a building; substantially rehabilitate it; put a business in it Real al Es Estate Buy a building; substantially Investment nts rehabilitate it; lease it to a tenant One Takeaway Pre-Regulations Buy a building that has been Examples vacant for 5 years and put a Structures business in it Role Playing Conclusion Buy land and put a building on it Courtesy of the National Trust for Historic Preservation

  18. EXAMPLES III An OZ Business can be a tenant Real al Es Estate Investment nts One Takeaway Pre-Regulations Examples Structures Role Playing Conclusion An OZ Business can be a lessor of equipment

  19. OZ Fund OZ Fund equity equity OZ Business OZ Business Real al Es Estate owns Investment nts Real leases Real Property Property One Takeaway Pre-Regulations Examples OZ Fund OZ Fund Structures owns Role Playing leases Equipment Conclusion Real Property/ Equipment leases OZ Business

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