§ 1.1400Z2(a)-1 Deferring tax on capital gains by investing in opportunity zones
(a) Deferring tax on capital gains.
(1) Overview.
(2) Procedure for deferring gain.
(b) Definitions.
(1) 30-month substantial improvement period.
(2) 70-percent tangible property standard.
(3) 70-percent use test.
(4) 90-percent investment standard.
(5) 90-percent qualified opportunity zone property holding period.
(6) 90-percent qualified opportunity zone business property holding period.
(7) 180-day period.
(8) Boot.
(9) Consolidated group.
(10) Deferral election.
(11) Eligible gain.
(12) Eligible interest.
(13) Eligible taxpayer.
(14) Inclusion event.
(15) Mixed-funds investment.
(16) Non-qualifying investment.
(17) Property.
(18) QOF.
(19) QOF C corporation.
(20) QOF corporation.
(21) QOF RIC.
(22) QOF REIT.
(23) QOF owner.
(24) QOF partner.
(25) QOF partnership.
(26) QOF S corporation.
(27) QOF shareholder.
(28) QOZ designation notice.
(29) Qualified opportunity zone business.
(30) Qualified opportunity zone business property.
(31) Qualified opportunity zone partnership interest.
(32) Qualified opportunity zone property.
(33) Qualified opportunity zone stock.
(34) Qualifying investment.
(35) Qualifying QOF partnership interest.
(36) Qualifying QOF stock.
(37) Qualifying section 355 transaction.
(38) Qualifying section 381 transaction.
(39) Related persons.
(40) Remaining deferred gain.
(41) Section 1400Z-2 regulations.
(c) Operational and special rules.
(1) Attributes of gains included in income under section 1400Z-2(a)(1)(B).
(2) Identification of which interest in a QOF corporation has been disposed of.
(3) Pro-rata method.
(4) Examples.
(5) Making an investment for purposes of an election under section 1400Z-2(a).
(6) Amount invested for purposes of section 1400Z-2(a)(1)(A).
(7) Eligible gains that a partnership elects to defer.
(8) Eligible gains that the partnership does not defer.
(9) Passthrough entities other than partnerships.
(d) Elections.
(1) Taxable year of deferral election.
(2) Annual reporting of qualifying investments.
(e) Interaction of section 1400Z-2 and § 1.897-6T.
(f) Treatment of mixed-funds investments.
(1) Investments to which no election under section 1400Z-2(a) applies.
(2) Treatment of deemed contributions of money under section 752(a).
(3) Treatment of contributions to QOF corporation in which no stock is received.
(4) Example.
(g) Applicability dates.
(1) In general.
(2) Prior periods.
§ 1.1400Z2(b)-1 Inclusion of gains that have been deferred under section 1400Z-2(a).
(a) Scope.
(b) General inclusion rule.
(c) Inclusion events.
(1) In general.
(2) Termination or liquidation of QOF or QOF owner.
(3) Transfer of an investment in a QOF by gift or incident to divorce.
(4) Transfer of an investment in a QOF by reason of the taxpayer's death.
(5) Grantor trusts.
(6) Special rules for partners and partnerships.
(7) Special rules for S corporations.
(8) Distributions by a QOF corporation.
(9) Dividend-equivalent redemptions and redemptions of section 306 stock.
(10) Qualifying section 381 transactions.
(11) Section 355 transactions.
(12) Recapitalizations and section 1036 transactions.
(13) Section 304 transactions.
(14) Deduction for worthlessness.
(15) Decertification of a QOF.
(16) Other inclusion and non-inclusion events.
(d) Holding periods.
(1) Holding period for qualifying investment.
(2) Status of QOF assets as qualified opportunity zone property.
(e) Amount includible.
(1) In general.
(2) Property received from a QOF in certain transactions.
(3) Gain recognized on December 31, 2026.
(4) Special amount includible rule for partnerships and S corporations.
(5) Limitation on amount of gain included after statutory five-year and seven-year basis increases.
(f) Examples.
(g) Basis adjustments.
(1) Basis adjustments under section 1400Z-2(b)(2)(B)(ii) resulting from the inclusion of deferred gain.
(2) Amount of basis adjustment under section 1400Z-2(b)(2)(B)(iii) and (iv).
(3) Examples.
(4) Special partnership rules.
(5) Basis adjustments in S corporation stock.
(6) Basis in the hands of a taxpayer who received a qualifying investment in a QOF by reason of the prior owner's death.
(h) Notifications by partners and partnerships, and shareholders and.
(1) Notification of deferral election.
(2) Notification of deferred gain recognition by indirect QOF owner.
(3) Notification of section 1400Z-2(c) election by QOF partner or QOF partnership.
(4) S corporations.
(i) Reserved.
(j) Applicability dates.
(1) In general.
(2) Prior periods.
§ 1.1400Z2(c)-1 Investments held for at least 10 years.
(a) Scope.
(b) Investment for which an election can be made.
(1) In general.
(2) Special election rules for QOF partnerships and QOF S corporations.
(3) Basis adjustments upon sale or exchange of qualifying QOF stock.
(c) Extension of availability of the election described in section 1400Z-2(c).
(d) Examples.
(e) Capital gain dividends paid by a QOF RIC or QOF REIT that some shareholders may be able to elect to receive tax free under section 1400Z-2(c).
(1) Eligibility.
(2) Definition of capital gain dividend identified with a date.
(3) General limitations on the amounts of capital gain with which a date may be identified.
(4) Determination of the amount of capital gain with which a date may be identified.
(f) Applicability dates.
§ 1.1400Z2(d)-1 Qualified opportunity funds and qualified opportunity zone businesses.
(a) Overview.
(1) Eligible entity.
(2) Self-certification as a QOF.
(3) Self-decertification of a QOF.
(4) [Reserved]
(b) Valuation of property for purposes of the 90-percent investment standard and the 70-percent tangible property standard.
(1) In general.
(2) Special rules.
(3) Applicable financial statement valuation method.
(4) Alternative valuation method.
(c) Qualified opportunity zone property.
(1) In general.
(2) Qualified opportunity zone stock.
(3) Qualified opportunity zone partnership interest.
(d) Qualified opportunity zone business.
(1) In general.
(2) Satisfaction of 70-percent tangible property standard.
(3) Operation of section 1397C requirements adopted by reference.
(4) Trade or businesses described in section 144(c)(6)(B) not eligible.
(5) Tangible property of a qualified opportunity zone business that ceases to be qualified opportunity zone business property
(6) Cure period for qualified opportunity zone businesses.
(e) Applicability dates.
(1) In general.
(2) Prior periods.
§ 1.1400Z2(d)-2 Qualified opportunity zone business property
(a) Qualified opportunity zone business property.
(1) In general.
(2) Qualified opportunity zone business property requirements.
(b) Tangible property owned by an eligible entity.
(1) Purchase requirement.
(2) Original use or substantial improvement requirement.
(3) Original use of tangible property acquired by purchase.
(4) Substantial improvement of tangible property acquired by purchase.
(c) Tangible property leased by an eligible entity.
(1) Qualifying acquisition of possession.
(2) Arms-length terms.
(3) Additional requirements for tangible property leased from a related person.
(4) Plan, intent, or expectation for purchases not for fair market value.
(d) Holding period and use within a qualified opportunity zone of owned or leased tangible property.
(1) In general.
(2) Valuation of owned and leased property.
(3) Substantially all of an eligible entity's holding period for owned or leased tangible property.
(4) Substantially all of the use of owned or leased tangible property in a qualified opportunity zone.
(e) Applicability dates.
(1) In general.
(2) Prior periods.
§ 1.1400Z2(e)-1 [Reserved]
§ 1.1400Z2(f)-1 Administrative rules- penalties, anti-abuse, etc.
(a) In general.
(b) Time period for a QOF to reinvest certain proceeds.
(1) In general.
(2) Federally declared disasters.
(c) Anti-abuse rules.
(1) General anti-abuse rule.
(2) Special anti-abuse rule for partnerships.
(3) Examples.
(d) Applicability dates.
(1) In general.
(2) Prior periods.