As long as you establish active business.
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How can art collectors benefit from the OZ tax incentive?
Following the change of the 1031 exchange, how can art collectors now use QOFs instead?
Answers
Art collectors have a tough road to hoe when trying to take advantage of QOFs because the art needs to be held as part of a trade or business. You'll need to be a dealer in order to meet that requirement. If you're merely collecting art and holding it as an investment, you generally can't put the art into a QOF or QOZB. So you'll need to qualify as a dealer first, take the ordinary income tax hit on a few of the pieces during the ten-year holding period, then enjoy the benefits after ten years are up. It is not impossible, but it's less palatable than operating real estate.
If capital gains are realized, these will qualify for the OZ benefits if amounts are invested in QOFs as required.
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