--- title: "Qualified Opportunity Zone: Partnership Interest" description: Understanding the different types of investments can help investors better determine the right QOF for their particular wealth-building strategy. image: https://www.realized1031.com/hubfs/Images/UI/graphics/charts-graphs/QOZ-Qualified-Opportunity-Zone-Partnership-Interests-Diagram.png --- [![Realized 1031 Exchange Marketplace](https://www.realized1031.com/hs-fs/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black.png?width=240&height=80&name=Realized-Logo-Black.png "Realized 1031 Logo") ](https://www.realized1031.com/) - [Wealth Management Gap](https://www.realized1031.com/the-wealth-management-gap) - [Our Process](https://www.realized1031.com/how-realized-works) - [Financial Advisors](https://www.realized1031.com/advisor) - [Resources](https://www.realized1031.com/resources) - [The Company](https://www.realized1031.com/about-us) - [Articles](https://www.realized1031.com/blog) [Register](https://www.realized1031.com/marketplace) [Log In](https://www.realized1031.com/login) - Better Business Bureau Rating: **A+** - [FINRA BrokerCheck](https://brokercheck.finra.org/firm/summary/22333) - [Call](tel:1-877-797-1031) **(877) 797-1031** # Qualified Opportunity Zone: Partnership Interest Posted May 16, 2019 The term partner or partnership is one of the most overused terms in the business world today.  It takes on a variety of definitions depending upon context. However, the concept of partnerships, or rather, partnership interests, are more well defined when it comes to the [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) (“QOZ”) Program. ### Why Become a QOZ Limited Partner A QOZ Partnership Interest is one of three types of assets in which a Qualified Opportunity Fund (“QOF”) can invest. We discussed the other two asset types – Qualified Opportunity Zone Business Property (QOZBP) and Qualified Opportunity Zone Stock – in previous articles. ![Qualified Opportunity Zone Partnership Interests](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/charts-graphs/QOZ-Qualified-Opportunity-Zone-Partnership-Interests-Diagram.png?width=800&name=QOZ-Qualified-Opportunity-Zone-Partnership-Interests-Diagram.png) As a limited partner in a typical limited partnership investment, partners receive a share of profits generated by an underlying investment, without having to worry about their personal assets being liable should anything go wrong. In other words, what is at risk is limited to what they have invested.  This also holds true for a Qualified Opportunity Zone Partnership, however the partners are not directly investing in a QOZ Partnership Interest, the Qualified Opportunity Fund (QOF) is. ### Partnership Interests in the Qualified Opportunity Zone An investor cannot take their realized capital gains from the sale of an asset and invest them directly in a [Qualified Opportunity Zone (QOZ)](https://www.realized1031.com/opportunity-zones) to defer taxes. Rather, those gains must be funneled into a certified Qualified Opportunity Fund. The fund can then use that money to invest in a QOZ Partnership Interest. Qualified Opportunity Zone Partnership Interest is defined as: “. . . a domestic partnership interest acquired by the QO Fund after December 31, 2017, solely in exchange for cash. As with corporations, when the partnership interest is issued, the partnership must be a QOZB and remain one during substantially all of the QO Fund’s holding period of such interest.”1 Note that "solely in exchange for cash" is referencing the fact the QOF must acquire the partnership interest with strictly cash using investor funds. The partnership as a whole, however, can use leverage to expand its balance sheet as it so pleases. Breaking down the definition above further: - The QOF is invested in a partnership interest of the QOZ Business. The investors participation is limited to that of investing your deferred capital gains into the QOF, or any outside cash investment should it be brought into the fund as well. - The partnership must run as a QOZ Business, subject to requirements outlined by U.S. Department of the Treasury and the Internal Revenue Service (IRS). Specifically, that substantially all of the tangible property owned or leased by the entity is QOZ Business Property and earns at least 50% of its gross income from the active conduct of a trade or business, among other requirements. ### Partnership Interest vs. Business Property Assume that an investor's Qualified Opportunity Fund (“QOF”) decides to invest in an abandoned shopping center in a QOZ, except the fund does not want to handle the real estate directly. Instead, it enters into a partnership with Development Partner LP. The QOF supplies the capital (Limited Partner), while Development Partner contributes its expertise and leadership in remodeling the shopping center, getting it leased and managing it going forward (General Partner). When it comes time for the partnership to sell, the QOF and Development Partner sell the center and split the proceeds according to the agreed upon terms. The investor receives a percentage of those proceeds, less any costs associated with the Limited Partnership or management fees, as well as deferral on the initial capital gains you invested in the QOF depending on the hold period. Remember, however, that there is no guarantee of return or proceeds, and that there can be a split of losses instead. ![Qualified Opportunity Zone Partnership Interests Diagram](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/charts-graphs/QOZ-Qualified-Opportunity-Zone-Partnership-Interests-Diagram-2.png?width=800&name=QOZ-Qualified-Opportunity-Zone-Partnership-Interests-Diagram-2.png) The QOF makes the decision as to what type of investment it will make in a QOZ. However, understanding the different types of investments can help investors better determine the right QOF for their particular investment strategy.   Download The Guide To Opportunity Zones [![Download The Guidebook to QOZ's](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/QOZ-eBook-250.png?width=250&height=250&name=QOZ-eBook-250.png "Learn More About Qualified ...") ](https://www.realized1031.com/blog/qualified-opportunity-zone-partnership-interest#blogform) Download eBook ---   --- ### Download The Guidebook to QOZ's ![Download The Guide To Opportunity Zones](https://www.realized1031.com/hs-fs/hubfs/Images/UI/graphics/composites/QOZ-eBook-550.jpg?width=550&height=650&name=QOZ-eBook-550.jpg) Learn More About Qualified Opportunity Zones Investments. By providing your email and phone number, you are opting to receive communications from Realized. If you receive a text message and choose to stop receiving further messages, reply STOP to immediately unsubscribe. Msg & Data rates may apply. To manage receiving emails from Realized visit the Manage Preferences link in any email received. Search ### [Why Realized](https://www.realized1031.com/why-realized) - [Wealth Management](https://www.realized1031.com/the-wealth-management-gap) - [Why Realized](https://www.realized1031.com/why-realized) - [Our Process](https://www.realized1031.com/how-realized-works) - [Scenarios](https://www.realized1031.com/scenarios) - [Private Client Program](https://www.realized1031.com/private-client) - [Realized Exchange Services](https://www.realized1031.com/realized-exchange-services) ### [The Company](https://www.realized1031.com/about-us) - [The Team](https://www.realized1031.com/about-us) - [FAQ](https://www.realized1031.com/frequently-asked-questions) - [Testimonials](https://www.realized1031.com/testimonials) - [Press](https://www.realized1031.com/press) - [Careers](https://www.realized1031.com/careers) ### [Partners](https://www.realized1031.com/partners) - [Financial Advisors](https://www.realized1031.com/advisor) - [Broker Dealers](https://www.realized1031.com/partners/broker-dealers) - [Real Estate Agents](https://www.realized1031.com/partners/real-estate-agents) - [Certified Public Accountants](https://www.realized1031.com/partners/certified-public-accountants) ### [Resources](https://www.realized1031.com/resources) - #### Learn - [Articles](https://www.realized1031.com/blog) - [Glossary of Terms](https://www.realized1031.com/glossary) - [Capital Gains Tax Rates](https://www.realized1031.com/capital-gains-tax-rate) - #### Watch - [Video Library](https://www.realized1031.com/videos) - [Webinar Archive](https://www.realized1031.com/webinars) - #### Read - [Delaware Statutory Trust](https://www.realized1031.com/delaware-statutory-trust) - [Tenants-In-Common](https://www.realized1031.com/tenants-in-common-tic) - [1031 Exchange](https://www.realized1031.com/1031-exchange) - [Qualified Intermediary](https://www.realized1031.com/qualified-intermediary) - [Qualified Opportunity Zones](https://www.realized1031.com/opportunity-zones) #### Realized - 500 W 13th Street Austin, TX 78701 - (877) 797-1031 ##### [Contact Us](https://www.realized1031.com/contact-us) - [![Realized on Facebook](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-facebook-whiterev.png?width=60&height=60&name=social-facebook-whiterev.png)](https://www.facebook.com/Realized/) - [![Realized on LinkedIn](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-linkedin-whiterev.png?width=60&height=60&name=social-linkedin-whiterev.png)](https://www.linkedin.com/company/realized/) - [![Realized on YouTube](https://www.realized1031.com/hs-fs/hubfs/Images/UI/Social/Icons/Mix/social-youtube-whiterev.png?width=60&height=60&name=social-youtube-whiterev.png)](https://www.youtube.com/c/Realized1031?sub_confirmation=1) - [![Realized Holdings, Inc. BBB Business Review](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/bbb/RZH2-bbb-seal.png?width=40&height=65&name=RZH2-bbb-seal.png)](http://www.bbb.org/central-texas/business-reviews/real-estate-investors/realized-holdings-llc-in-austin-tx-1000112948/#bbbonlineclick) - [![FEA Logo](https://www.realized1031.com/hs-fs/hubfs/Images/professional-assoc/fea/RZH2-fea-logo.png?width=82&height=65&name=RZH2-fea-logo.png "FEA Logo")](https://www.1031.org) SECURITIES DISCLOSURE Realized1031.com is a website operated by Realized Technologies, LLC, a wholly owned subsidiary of Realized Holdings, Inc. (“Realized Holdings”). Securities and/or Investment Advisory Services may be offered through Registered Representatives or Investment Advisor Representatives of Realized Financial, Inc. ("Realized"), a broker/dealer, member [FINRA](https://www.finra.org)/[SIPC](https://www.sipc.org/), and registered investment adviser. Realized is a subsidiary of Realized Holdings, Inc. ("Realized Holdings"). Check the background of this firm on [FINRA's BrokerCheck](https://brokercheck.finra.org/firm/summary/22333). Hypothetical example(s) are for illustrative purposes only and are not intended to represent the past or future performance of any specific investment. Investing in alternative assets involves higher risks than traditional investments and is suitable only for sophisticated investors. Alternative investments are often sold by prospectus that discloses all risks, fees, and expenses. They are not tax efficient and an investor should consult with his/her tax advisor prior to investing. Alternative investments have higher fees than traditional investments and they may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain and should not be deemed a complete investment program. The value of the investment may fall as well as rise and investors may get back less than they invested. This site is published for residents of the United States who are accredited investors only. Registered Representatives and Investment Advisor Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every representative listed. For additional information, please contact the Realized Compliance department at 512-472-7171 or info@realized1031.com. - [Terms & Conditions](https://www.realized1031.com/terms-and-conditions) - [Privacy Policy](https://www.realized1031.com/privacy-policy) - [Form CRS](https://www.realized1031.com/hubfs/common-files/disclosures/FormCRS.pdf) - [ADV 2A](https://www.realized1031.com/hubfs/common-files/disclosures/ADV2A.pdf) - [Reg BI Disclosures](https://www.realized1031.com/hubfs/common-files/disclosures/RegBI.pdf) -   © 2026 Realized Holdings, Inc. ```json { "@context" : "http://schema.org/", "@type" : "BlogPosting", "articleBody" : "The term partner or partnership is one of the most overused terms in the business world today. It takes on a variety of definitions depending upon context. However, the concept of partnerships, or rather, partnership interests, are more well defined when it comes to the Qualified Opportunity Zones (“QOZ”) Program. Why Become a QOZ Limited Partner A QOZ Partnership Interest is one of three types of assets in which a Qualified Opportunity Fund (“QOF”) can invest. We discussed the other two asset types – Qualified Opportunity Zone Business Property (QOZBP) and Qualified Opportunity Zone Stock – in previous articles. As a limited partner in a typical limited partnership investment, partners receive a share of profits generated by an underlying investment, without having to worry about their personal assets being liable should anything go wrong. In other words, what is at risk is limited to what they have invested. This also holds true for a Qualified Opportunity Zone Partnership, however the partners are not directly investing in a QOZ Partnership Interest, the Qualified Opportunity Fund (QOF) is. Partnership Interests in the Qualified Opportunity Zone An investor cannot take their realized capital gains from the sale of an asset and invest them directly in a Qualified Opportunity Zone (QOZ) to defer taxes. Rather, those gains must be funneled into a certified Qualified Opportunity Fund. The fund can then use that money to invest in a QOZ Partnership Interest. Qualified Opportunity Zone Partnership Interest is defined as: “. . . a domestic partnership interest acquired by the QO Fund after December 31, 2017, solely in exchange for cash. As with corporations, when the partnership interest is issued, the partnership must be a QOZB and remain one during substantially all of the QO Fund’s holding period of such interest.”1 Note that \"solely in exchange for cash\" is referencing the fact the QOF must acquire the partnership interest with strictly cash using investor funds. The partnership as a whole, however, can use leverage to expand its balance sheet as it so pleases. Breaking down the definition above further: The QOF is invested in a partnership interest of the QOZ Business. The investors participation is limited to that of investing your deferred capital gains into the QOF, or any outside cash investment should it be brought into the fund as well. The partnership must run as a QOZ Business, subject to requirements outlined by U.S. Department of the Treasury and the Internal Revenue Service (IRS). Specifically, that substantially all of the tangible property owned or leased by the entity is QOZ Business Property and earns at least 50% of its gross income from the active conduct of a trade or business, among other requirements. Partnership Interest vs. Business Property Assume that an investor's Qualified Opportunity Fund (“QOF”) decides to invest in an abandoned shopping center in a QOZ, except the fund does not want to handle the real estate directly. Instead, it enters into a partnership with Development Partner LP. The QOF supplies the capital (Limited Partner), while Development Partner contributes its expertise and leadership in remodeling the shopping center, getting it leased and managing it going forward (General Partner). When it comes time for the partnership to sell, the QOF and Development Partner sell the center and split the proceeds according to the agreed upon terms. The investor receives a percentage of those proceeds, less any costs associated with the Limited Partnership or management fees, as well as deferral on the initial capital gains you invested in the QOF depending on the hold period. Remember, however, that there is no guarantee of return or proceeds, and that there can be a split of losses instead. The QOF makes the decision as to what type of investment it will make in a QOZ. However, understanding the different types of investments can help investors better determine the right QOF for their particular investment strategy. 1. Legal Information Institute. 26 U.S. Code § 1400Z-2 - Special rules for capital gains invested in opportunity zones. Cornell Law School.", "articleSection" : [ "Qualified Opportunity Zones" ], "author" : { "@type" : "Person", "email" : "marketing@realized1031.com", "image" : "", "name" : "The Realized Team", "url" : "https://www.realized1031.com/blog/author/the-realized-team" }, "dateModified" : "2020-12-02T21:19:55+0000", "datePublished" : "2020-12-02T21:19:55+0000", "description" : "Understanding the different types of investments can help investors better determine the right QOF for their particular wealth-building strategy.", "headline" : "Qualified Opportunity Zone: Partnership Interest", "image" : { "@type" : "ImageObject", "height" : 343, "url" : "https://cdn2.hubspot.net/hubfs/733513/Images/UI/graphics/charts-graphs/QOZ-Qualified-Opportunity-Zone-Partnership-Interests-Diagram.png", "width" : 800 }, "mainEntityOfPage" : "https://www.realized1031.com/blog/qualified-opportunity-zone-partnership-interest", "name" : "Qualified Opportunity Zone: Partnership Interest", "publisher" : { "@type" : "Organization", "address" : { "@type" : "PostalAddress", "addressCountry" : "USA", "addressLocality" : "Austin", "addressRegion" : "TX", "postalCode" : "78701", "streetAddress" : "500 W 13th Street " }, "logo" : { "@type" : "ImageObject", "height" : 60, "url" : "http://www.realized1031.com/hubfs/Images/Brand/Logo/Realized/Realized-Logo-Black-No-Margin-296x60-AMP.png", "width" : 296 }, "name" : "Realized" }, "thumbnailUrl" : "https://cdn2.hubspot.net/hubfs/733513/Images/UI/graphics/charts-graphs/QOZ-Qualified-Opportunity-Zone-Partnership-Interests-Diagram.png" } ```