I know QOFs get a "reasonable period” to reinvest proceeds from sales, but what does that actually mean? Who decides what’s reasonable? Does it change depending on the industry?
The second set of regulations define the reasonable period for QOFs to reinvest proceeds as 12 months. The proceeds must be continuously held in cash, cash equivalents, and debt instruments with a term of 18 months or less. Finally, a QOF may reinvest proceeds from the sale of investment into another type of qualifying investment.
The reasonable period has been defined in the proposed regulations as 12 months, beginning on the date of the relevant distribution, sale or disposition.
In their guidance issued in April 2019, the IRS clarified that the “reasonable period” for reinvestment for purposes of meeting the 90-percent investment requirement is 12 months from the date of the distribution, sale or disposition of qualifying assets (with no distinction between asset classes). They allowed, however, for additional time if the delay is “attributable to a delay in government action for which an application is complete.”
A development-level partnership also should be created underneath the QOF. If that QOZB interest is sold, the regulations give one year to reinvest those proceeds and maintain the QOF Opportunity Zone benefits.
The IRS regulations on this point specify the reinvestment period will be 12 months.
The time frame for a QOF to invest gain rollover funds received from investors is 180 days.