Either can possibly work.
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How can I enjoy tax benefits if I acquire a business in an OZ?
I want to make an acquisition of a business located in an Opportunity Zone. Will the tax benefits still apply to me if I only purchase the assets and/or equity of the entity? The business is in manufacturing and logistics.
Answers
You'll need to make sure you meet either the original use or substantial improvement requirement for all the assets involved, regardless of whether you purchase the assets directly or purchase equity. The easiest way to do this would be a "washout," in which you get rid of the existing assets and purchase brand new ones to the fullest extent possible (you'll need to do this with at least 70% of the assets to meet your compliance testing). Otherwise, purchasing an existing business without relocating it won't work very well on the compliance side.
To obtain the deferral and step up benefits you must invest through a QOF in a QOZB. Direct investment will not provide you the benefits.
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