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Non-Qualified Opportunity Zone Property

Non-Qualified Opportunity Zone Property is a term that refers to an investment or property that does not meet the requirements to be considered a Qualified Opportunity Zone Property within the context of the Qualified Opportunity Fund (QOF) industry in the United States.

The Qualified Opportunity Fund program was created by the Tax Cuts and Jobs Act of 2017 and is designed to incentivize investment in economically distressed communities, known as Opportunity Zones. By investing in a Qualified Opportunity Zone through a QOF, investors can defer or reduce capital gains taxes, among other potential tax benefits.

To be considered a Qualified Opportunity Zone Property, the property must meet certain requirements such as:

  1. Location: Must be located within a designated Opportunity Zone.
  2. Use: Substantially all of the property’s use must be within an Opportunity Zone during the holding period.
  3. Original Use or Substantial Improvement: The original use of the property must commence with the QOF, or the QOF must substantially improve the property.
  4. Business Requirements: At least 50% of the income generated by the property must be from the active conduct of a trade or business, and certain “sin businesses” are excluded.

If a property or investment fails to meet these criteria, it would be classified as Non-Qualified Opportunity Zone Property. Non-qualified investments won’t be eligible for the same tax benefits as qualified investments, and the specifics may vary depending on individual circumstances and tax law.