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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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The following summarizes a recent discussion with the drafting attorney of IRS Notice 2020-39 on a mismatch of the IRS Opportunity Zones deferral election forms and the permitted extension of time until December 31, 2020 to make qualified investments in a Qualified Opportunity Fund (“QOF”) with 2019 capital gain. The issue arises&nbsp;in that the deferral election for 2019 must be made on IRS Forms 8949 and 8997 by October 15, 2020 (the extended due date for individual tax returns), but the extension of the investment in a QOF does not need to be made until the period after October 15 and by December 31, 2020.&nbsp; The IRS agreed that although the extension for making the investment is through December 31, 2020, there is a mismatch with respect to the requirement to state the investment date on the IRS election forms for 2019.

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At this time, for those who want to take advantage of the October 15, 2020 through December 31, 2020 extension, the only remedy seems to be the filing of the federal income tax return for 2019 and paying the capital gain tax for 2019, making the timely investment by December 31, 2020, and then filing an amended tax return with the proper deferral election showing the investment date.&nbsp; In effect, this makes the deferral through December 31, very ineffective for practical purposes because taxpayers would be going out-of-pocket on their 2019 capital gain tax and then receiving such tax amount as a refund later after they invest the full capital gain amount in a QOF. Any deferral election made before the investment in the QOF may be ineffective because the IRS may take the position that a deferral election cannot be made until after the investment has been made.

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We have not heard of any internal effort at the IRS to fix the mismatch in advance of October 15.

For more information contact Frank Ferrante&nbsp;or Alexis Kim, or any member of the firm's&nbsp;<a href="https://www.thompsonhine.com/services/qualified-opportunity-zones" target="_self" rel="noopener">Qualified Opportunity Zones</a> group.

<a href="https://www.thompsonhine.com/professionals/ferrante-francesco" target="_self" rel="noopener">Francesco A. </a><a href="https://www.thompsonhine.com/professionals/ferrante-francesco" target="_self" rel="noopener">Ferrante</a> Thompson Hine LLP Austin Landing I, 10050 Innovation Drive, Suite 400 Dayton, OH 45342-4934 O: 937.443.6740 M: 937.470.0598 <a href="mailto:Francesco.Ferrante@ThompsonHine.com">Francesco.Ferrante@ThompsonHine.com</a>

<a href="https://www.thompsonhine.com/professionals/kim-alexis" target="_self" rel="noopener">Alexis J. Kim</a> Thompson Hine LLP 3900 Key Center 127 Public Square Cleveland, Ohio 44114-1291 O: 216.566.5732 <a href="mailto:Alexis.Kim@ThompsonHine.com">Alexis.Kim</a>@debijones

https://admin.thompsonhine.com/wp-content/uploads/2022/04/Qualified_Opportunity_Fund_Investment_Extension_from_IRS_Does_Not_Grant_Full_Relief.pdf

Qualified Opportunity Fund Investment Extension from IRS Doesn’t Grant Full Relief

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