This depends on the facts of the offering.
Ask A Question
How can the operation of a rental property qualify as an active conduct of a trade or business in an OZ?
Does a triple net lease qualify?
Answers
No. Rental of real estate is not a trade or business.
A triple net lease normally does not qualify but the final regulations provide an example where one third of a building had a NNN lease (likely considered an incidental use) and the overall building constituted qualifying property. I advise clients to have no NNN leases in a QOZB as it creates unnecessary peril.
Active. Therefore purely triple net won’t work.
NNN leases do not qualify. You'll need to look to Section 162 definition of a trade or business, which is maddeningly unclear. Generally, the landlord has to be performing traditional services about the building, such as negotiating leases, maintaining common areas, removing trash/snow/debris, monitoring and paying for the utilities and property taxes, and performing routine repairs and light renovations.
In general terms, triple net leases will not qualify. If a building or a property with various tenants, the example provided suggest a max of one third triple net lease limit.
DISCLAIMER:the information found on this website is intended to be general information; it is not legal or financial advice. Specific legal or financial advice can only be given by a licensed professional with full knowledge of all the facts and circumstances of your particular situation. You should seek consultation with legal and financial experts prior to participating in any aspect relating to Opportunity Zones. Posting a question on this website does not create an attorney-client relationship. All questions you post will be available to the public; do not include confidential information in your question.