The IRS has offered guidance on Tax Relief for Investors and QOF Funds as a result of COVID-19. You can see an excellent summary of the guidance from CPA Practice Advisor and read the FAQs from the IRS.
The main points include:
- You may be eligible for more time to make an investment in a QOF to defer gains from property sales. Taxpayers selling property for a qualified gain may get additional time if the 180th day to invest in a QOF was supposed to fall between April 1 and December 30, 2020. The taxpayer now has until December 31, 2020 to invest that gain into a QOF.
- QOFs are not liable for 1400Z-2(f)(3) statutory penalties if they fail to hold less than 90% of assets in a QOZ Property on any semi-annual testing dates from April 1, 2020, through Dec. 31, 2020. Failures under this statue will not prevent an entity’s qualification as a QOF or an investment’s classification as a QOF investment.
- QOFs that qualified for a 31-month working capital safe harbor have an additional 24 months due to COVID-19 in which to expend capital (if they meet certain requirements).
- Investors who received distributions of QOF stock or partnership interest (and realized proceeds from a sale) have an additional 12 months to reinvest any gains as they intended to before the pandemic.
If you have any questions about these changes or Qualified Opportunity Zone Funds and investments, please contact Steve Vlasak.
