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What’s included in the annual Dec. 31 testing requirements for QOF?

Is there any way to get an extension?


Answers
  • Maria De Los Angeles Rivera
    February 01, 2020

    The QOF must meet the 90% test. That is, 90% of its assets must be Qualified Opportunity Zone property. There are some safe harbors for funds received within six months and proceeds or distributions from investments.

  • Valerie Grunduski
    January 24, 2020

    Form 8996 outlines, the requirement for testing at the QOF level once the election to be treated as a QOF is made. Please note that it is important that the QOF elect to be such prior to receiving its first capital gain contribution. For the QOF, any cash received does not need to be included in the 8996 testing until after six months. This presumes that the funds are still held in cash. There is also a reasonable cause exception for failure to satisfy the 90% investment standard, but there is no further guidance on what the IRS will accept as "reasonable"

  • Matthew Rappaport
    December 19, 2019

    They are testing whether the QOF is at least 90% invested in QOZ property. You can't get an extension, but there is a new cash safe harbor for the first testing period, so perhaps that'll be of use in your particular situation.

  • Scott McIntosh
    December 18, 2019

    It doesn't have to be filed on December 31. That's just the date you'll look at when calculating whether the fund has met the 90% investment threshold. Check out IRS Form 8996 for more detail on how the fund's asset test is calculated/reported. Assuming your fund is a partnership, you'll file Form 8996 with the fund's annual tax return by March 16 (or September 15th, if you request an extension). Scott McIntosh, J.D. Opportunity Zone Consulting Group Mobile: 859-421-1899 www.ozconsultinggroup.com

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