Unfortunately, the proposed regulations issued mid-April 2019 clarify that a transfer by gift or charitable contribution of a Qualified Opportunity Fund (QOF) interest will be an inclusion event that causes an acceleration of the deferred gain. In contrast, when the gift occurs from an estate at death of the taxpayer, the inheritor of the QOF interest may assume the same holding period of the decedent, which is not an inclusion event so long as the estate or the heir does not sell the interest until after the decedent’s 10-year holding period. Also not an inclusion event is a transfer of a QOF interest to a grantor trust (that is an disregarded entity for tax purposes) but if the trust were to change the status to other than a grantor trust, that is an inclusion event.
