Which leasing activity would be treated as an active conduct of a trade or business?
NNN leases are not the active conduct of a trade or business unless very narrow circumstances apply. To wit, if you had a portfolio of NNN leases and it took regular, continuous, and substantial work to simply keep tabs on all of them. Other than that, though a single NNN lease is not an active trade or business and does not qualify the real estate as QOZBP.
The regulations allow a 1 to 3 ratio of a building to be triple-net-leased. Facts and circumstances might allow more than that but it could be a litigated issue by the IRS.
A triple-net-lease by a QOZB (as a lessor) can be considered an active conduct of a trade or business, if it is amended to require the QOZB to provide certain services (such as maintenance of common areas) to the lessee. The QOZB should be permitted to charge the cost of these services back to the lessee, so there is no difference in cashflow.
A triple-net lease is not considered an active trade or business for OZ requirement. The regulations include an example of how a combination of triple-net lease and leases will qualify as an active trade or business.
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