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How can QOFs prove that they meet the 90 % Substantially All test?

QOFs are able to self-certify that they meet the 90 % Substantially All test on the Form 8996 filed with their tax returns. What kind of documents do they need to back this up?

  • Brad Cohen
    August 13, 2019

    Nothing specific. It would be good to have some sort of proof - worksheet appraisals.

  • Pat Cardwell
    August 12, 2019

    Ordinary business records. Audited financials. I would think that would do it.

  • Erik Kodesch
    August 11, 2019

    I am not sure, but I think a balance sheet should be sufficient.

  • Blake Christian
    August 10, 2019

    The burden is on the taxpayer, so fully documenting the assets held, their proper valuation and OZ location and program eligibility will be key. Fund managers really need to monitor these tests monthly to ensure semi-annual compliance.

  • John Wegmann
    August 10, 2019

    Form 8996, as with any tax return, is subject to examination or audit by the IRS. The QOF must retain records that support amounts reported on the form. This would include financial statements, evidence of the amounts incurred to acquire assets, evidence of the location of the assets, depreciation schedules, evidence of expenditures made to make substantial improvements to property, and supporting calculations (tax work papers).

  • Neil Faden
    August 07, 2019

    Yes, QOFs self-certify on a form to the IRS attached to their tax returns. I think QOFs should keep reporting from the entities they invest in regarding how the businesses meet the various tests that need to be met by each QOZB. Exactly what will depend on the circumstances of each business.

  • Guy Nicio
    August 08, 2019

    90% test for QOF