Relief for Qualified Opportunity Funds

The IRS released Notice 2020-39 which provides relief for Qualified Opportunity Funds (QOFs) and their investors due to the Coronavirus pandemic.

180-day investment requirement

qualified opportunity fundsTaxpayers who sold property for an eligible gain and who would have had 180 days to invest in a QOF to defer that gain now have more time to do so. If the last day of the 180-day investment period within which a taxpayer must make an investment in a QOF in order to satisfy the 180-day investment requirement falls between April 1, 2020 and December 31, 2020, then the last day of that 180-day investment period is postponed to December 31, 2020.

90-percent investment standard

A QOF’s failure to satisfy the 90% investment standard of its assets in Qualified Opportunity Zone Property on any semi-annual testing dates from April 1, 2020, through Dec. 31, 2020, is due to reasonable cause under section 1400Z-2(f)(3). The failure doesn’t prevent qualification of an entity as a QOF or an investment in a QOF from being a qualifying investment. The QOF will not be liable for the statutory penalty under section 1400Z-2(f) due to such a failure during this period.

Working capital safe harbor

Qualified Opportunity Zone (QOZ) businesses holding working capital assets intended to be covered by the working capital safe harbor before December 31, 2020, receive up to an additional 24 months to expend the working capital assets of the QOZ business.

12-month reinvestment period

For QOFs with a reinvestment period that includes January 20, 2020, the QOFs have an additional 12 months in which to reinvest some or all of the proceeds received by the QOF from the return of capital or the sale or disposition of some or all of the QOF’s QOZ property.

Read the IRS updated Qualified Opportunity Zones FAQs here.

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