The IRS Has Offered Guidance on Tax Relief for QOF Funds and Investors
Articles by: Richey May, Jun 10, 2020
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 here and read the FAQs from the IRS here.
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.