If the first month the QOF is certified is December 202, is the first reporting deadline for the 90% assets test December 31, 2021? Can you skip the first reporting period and as such the 90% test reporting deadline is actually June 30, 2022 and then each 6 month period after that?
You don't get a total mulligan on the first reporting period. It's only to the extent the assets consist of cash contributed within the prior six months. If you have property of any kind in the Qualified Opportunity Fund, that property is subject to testing.
Technically, the first testing date will still be December 31, 2021, but there is a favorable rule that generally allows a Qualified Opportunity Fund (QOF) to exclude newly contributed funds from both the numerator and the denominator in the calculation on the next testing date that follows the contribution. But there is a technical problem with this taxpayer-friendly exclusion: if the QOF's only assets are the contributed capital, and all of the contributed capital is excluded from the numerator and the denominator on the December 31, 2021 testing date, the QOF will have a division by zero error; it does not automatically satisfy the 90% test. This does not appear to the IRS's intent behind this exclusion, but we recommend, out of an abundance of caution, that the QOF invest at least some small portion of contributed funds into qualified opportunity zone property by December 31, 2021.
The first test will be December 2021. Nevertheless, you should verify the safe harbors provided to the Qualified Opportunity Fund by the regulations.
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