In Notice 2020-39, the IRS provided relief from several deadlines relevant for investors in qualified opportunity funds (QOFs). This relief generally permits investors and funds to come into compliance by the end of 2020.
In particular, a rollover into a QOF that was due on or after April 1, 2020, may now be deferred to December 31, 2020.
Also, a QOF asset test failure from April 1 through December 31 is excused and presumed due to reasonable cause. Note that a QOF will still have to report an asset test failure, but will be permitted to pay zero penalty tax through the end of 2020. This relief would include a failure of the December 31 asset test itself, so for many QOFs, this effectively provides relief through June 30, 2021.
As under prior guidance, there is also an additional 24 months for 31-month “working capital plans” funded between April 1, 2020, and December 31, 2020, effectively meaning that these plans may cover up to 55 months of working capital expenditures.
QOFs that directly improve assets may now disregard all periods between April 1, 2020, and December 31, 2020, in measuring their 30-month substantial improvement window.
Finally, QOFs that receive distributions from investments have been granted an additional 12 months (on top of the regulatory 12 months, for a total of 24 months) to redeploy such proceeds if certain requirements are met.
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