QOF (Qualified Opportunity Fund)
En español: QOF (Qualified Opportunity Fund)
A qualified opportunity fund is the corporation or partnership through which money has to travel to reach an Opportunity Zone. An investor cannot buy a building in a zone directly and claim the treatment. The fund elects its own status by filing, and it has to keep at least 90 percent of its assets in qualifying zone property, tested twice a year, for as long as it exists.
- The fund is the taxpayer's structure, not the seller's concern. A seller is selling a building either way.
- Self-certification is not approval. Filing the election starts the obligations; nobody at the IRS confirms the fund is doing it correctly.
- The 90 percent test runs for the whole life of the fund, not just at the start. Year seven is a testing year the same as year one.
- Fund documents are a securities and tax question. The building is the part a broker can read.
A fund's assets on a semiannual testing date.
Idle cash is the ordinary way a fund fails a test it was never at risk of failing on the real estate. The working capital rules exist for exactly this, and they have to be set up in writing beforehand.
Tax mechanics change and individual situations differ. Treat this as orientation, not tax advice; the numbers on a specific transaction belong with a CPA or qualified intermediary.
Related terms
All termsOpportunity Zone (QOZ)
A qualified opportunity zone is a census tract the federal government has designated so that investors who roll a capital gain into a fund operating there get specific tax treatment.
DevelopmentSubstantial Improvement
Substantial improvement is the test an existing building has to pass before a fund's purchase counts as qualifying Opportunity Zone property.
InvestmentInclusion Event
An inclusion event is anything that ends the deferral early and pulls the postponed gain back into taxable income.
Terms arrive with the writing.
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