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Original use is one of the most important concepts outlined in the newest regulations for opportunity zone investments, according to Phil Jelsma, of Crosbie Gliner Schiffman Southard & Swanson. Opportunity zones require that a property is substantially improved by a qualified opportunity zone fund or subsidiary or the property’s original use commences with the qualified opportunity fund or subsidiary—but what exactly constitutes original use?

“The new regulations provide that original use commences when the property is placed in service for purposes of depreciation or amortization,” Jelsma, a partner and chair of the tax practice team at CGS3, tells GlobeSt.com. “Generally, if the property has been depreciated by another person, it will not meet the original use test and must be substantially improved unless it has been vacant for at least five years. Original use is deemed to commence upon purchase by a QOF or QOF Sub if the property has been vacant for at least five years. Improvements made by a lessee to leased property meet the original use requirement.”

Kelsi Maree Borland

Kelsi Borland is a freelance writer and editor living whose work has appeared in such publications as Travel + Leisure, Angeleno and Riviera Orange County.

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