The IRS has issued guidance under new section 1400Z-2 of the Internal Revenue Code relating to gains that may be deferred as a result of a taxpayer’s investment in a qualified opportunity fund (QOF). The guidance includes special rules for a QOF investment held by a taxpayer for at least 10 years.
Qualified opportunity zone business property is tangible property used in a trade or business of the QOF if the property was purchased after Dec. 31, 2017. The guidance permits tangible property acquired after Dec. 31, 2017, under a market rate lease to qualify as “qualified opportunity zone business property” if, during substantially all of the holding period of the property, substantially all of the use of the property was in a qualified opportunity zone.
A key part of the newly released guidance clarifies the “substantially all” requirements for the holding period and use of the tangible business property.