Yes, inventory in transit can qualify as Qualified Opportunity Zone (QOZ) business property.
According to the IRS FAQ, inventory (including raw materials) can qualify as QOZ business property. Additionally, inventory does not fail to qualify solely because it is in transit from a vendor to a QOF or QOZ business or from a QOF or QOZ business to a customer. This is further supported by the regulation § 1.1400Z2(d)-2(d)(4)(viii), which states that inventory in transit does not fail to be used in a QOZ solely because it is in transit from a vendor to a facility of the trade or business in a QOZ or from a facility of the trade or business in a QOZ to customers outside the QOZ. The distance traveled or brief warehousing while in transit does not affect this qualification.
Sources:
§ 1.1400Z2(d)-1. Qualified opportunity funds and qualified opportunity zone businesses.
Rev. Rul. 2018-29
Notice 2019-42
§ 1.1400Z2(d)-2. Qualified opportunity zone business property.
PLR 202249005
