You use the rules of Section 267(b) and 707(b)(1), except you have to substitute "20%" everywhere that "50%" appears. This generally means any immediate family member and any entity with which the acquirer/seller has 20% or more common ownership.
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What is defined as “unrelated party” when it comes to selling or acquiring OZ property?
What is the definition of unrelated party in this case?
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Related party means common ownership of at least 20% on both the buy and sell sides. Common ownership attribution rules for individuals include brothers, sisters (whole or half blood), spouse, ancestors and lineal descendants.
This is generally in reference to section 267 of the tax code. Lineal descendants or ancestors as well as siblings and spouse are related parties. Generally a more than 50% direct or indirect ownership (by those family members previously listed) of a corporation, partnership, S corporation, etc by a taxpayer. A grantor or fiduciary of a trust. A fiduciary and beneficiary of a trust.
Related party rules are incorporated from code sections 267(b) and 707b(1), but replacing 50% with 20% where it appears in those sections. Selected provisions of 267(b) are pasted below: The persons referred to in subsection (a) are: (1) Members of a family, as defined in subsection (c)(4); (2) An individual and a corporation more than 50 percent in value of the outstanding stock of which is owned, directly or indirectly, by or for such individual; (3) Two corporations which are members of the same controlled group (as defined in subsection (f));(4) A grantor and a fiduciary of any trust; (5) A fiduciary of a trust; (6) A fiduciary of a trust and a beneficiary of such trust; (7) A fiduciary of a trust and a beneficiary of another trust, if the same person is a grantor of both trusts; (8) A fiduciary of a trust and a corporation more than 50 (20) percent in value of the outstanding stock of which is owned, directly or indirectly, by or for the trust or by or for a person who is a grantor of the trust; (9) A person and an organization to which section 501 (relating to certain educational and charitable organizations which are exempt from tax) applies and which is controlled directly or indirectly by such person or (if such person is an individual) by members of the family of such individual; (10) A corporation and a partnership if the same persons own — (A)more than 50 (20) percent in value of the outstanding stock of the corporation, and (B) more than 50 (20) percent of the capital interest, or the profits interest, in the partnership; (11) An S corporation and another S corporation if the same persons own more than 50 percent in value of the outstanding stock of each corporation; (12) An S corporation and a C corporation, if the same persons own more than 50 (20) percent in value of the outstanding stock of each corporation; or (13) Except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of such estate.
Section 1400Z-2(e)(2) states that for purposes of this section [relating to Opportunity Zones], persons are related to each other if the persons are described in section 267(b) or 707(b)(1), determined by substituting 20% for 50% in each place it occurs in such sections. Google those other code sections and you can know what related is and conversely what is unrelated. Ground leases can help where there are related party issues. If related party rules are tripped, you could have non-qualifying assets in your fund and subject it to monthly penalties.
Related party is defined as defined for sections 267(b) and 707(b)(1), but instead of the 50% test, a 20% will be applied.
The definition of "related" is fairly extensive. It is more efficient to have information about the party and then determine if that party is related or unrelated.
Unrelated 20% or less.
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