If you can find another QOF fund to invest in within 180 days, you should be able to continue to defer. Otherwise, you will owe tax on deferred gain for year of dissolution event.
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I deferred gain based on an investment in a QOF, and now that QOF has dissolved before the end of my deferral period. What happens to my deferred gain?
I deferred gain based on an investment in a QOF, and now that QOF has dissolved before the end of my deferral period. What happens to my deferred gain?
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Unfortunately, the code and regulations do not allow a sale and reinvestment of a QOF interest prior to the 10-year holding period. The new regulations do allow QOFs to reinvest proceeds received from the sale of QOF property into another QOF within 12 months, provided other tests are met. However, this only helps with respect to the 90 percent and 70 percent semi-annual testing. It does not allow for further deferral of the gain, but Treasury is still considering if they have the authority to allow such deferral. They appear open-minded to the concept. Selling a QOF interest and allowing reinvestment does not appear to be on their radar. QOFs can also split up partnership investments by using the partnership provisions.
The first set of regs provided you could reinvest in another QOF within 180 days. Your holding period will start all over again.
That is an "inclusion event."
Either you find another way to defer it or invest in a postponement project, such as OZ.
Depending on when the original QOF dissolved, you may have an opportunity to reinvest those original gains into another QOF.
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