Opportunity Zone Magazine Volume 1, Issue 3 | Page 15

HOW DO I START MY OWN QOF?
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determined through a facts-and-circumstances test with
three different safe harbors.
• The 40% minimum threshold for intangible property
that must be used in the QOZB’s active trade or
business.
• The 5% maximum for non-qualified financial property.
• For property leased from a related party, compliance
associated with the permissible terms of the lease.
may not end up as rigorous as other incentive programs under
the tax code, certain mistakes may still result in disaster, so
be mindful of assembling and coordinating the right group of
professionals when starting your own QOF. The process is
conceptually easy at a bird’s-eye view but could be deceptively
tricky when parsing the details.
Judgment calls requiring close collaboration between the
various professionals working with the QOF and QOZB
will include:
• Whether and when to enact a cash-out refinance of the
QOZB’s investments in compliance with the anti-abuse
rules.
• How to treat mixed investments and inside-outside basis
disparities when the statute and regulations are not clear
about how to address certain nuances.
• Initial structuring (e.g., single vs. multiple QOFs or
single vs. multiple QOZBs) and reorganizations to
account for changing circumstances.
With such a tangle of statutory and regulatory provisions to
deal with, taxpayers should not attempt to navigate the OZ
program themselves. The accounting team, transactional
counsel, and tax counsel are all critical pieces of the advisory
puzzle, and each adviser should communicate regularly with
the others. Although the enforcement of the OZ program
Matthew E. Rappaport is the vice managing partner of Falcon
Rappaport & Berkman PLLC, and chairs its taxation and private
client groups. He concentrates his practice on taxation relating
to real estate, closely held businesses, private equity funds,
and trusts and estates. He advises clients on tax planning,
structuring and compliance for commercial real estate projects,
all stages of the business life cycle, generational wealth transfer,
family business succession, and executive compensation.
Rappaport has experience in complex deals involving Section
1031 Exchanges, the Opportunity Zone program, freeze
partnerships, private equity mergers and acquisitions, and
qualified small business stock.
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