Client is planning on purchasing a piece of land and constructing a commercial building to rent out in a recently designated opportunity zone. The purchase and construction will be done with a SMLLC and involves no debt. He intends to hold the property long term as a rental.
I'm reading (1400Z-2) where qualified opportunity funds that hold qualifying property in opportunity zones for at least 10 years will receive a step up in basis on the property to FMV at the time of sale. A qualified opportunity fund is defined as "any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property, determined by the average of the percentage of..." It appears there will be an annual certification process for funds and penalties that apply if less than 90% of the assets are held in opportunity zone property.
Will it be possible for the client to take advantage of the opportunity zone basis step up (after holding for 10 years) without going through all the formalities and costs of creating a qualified opportunity fund? He could form a partnership with his wife but prefers to keep things simple.