What happens if the fair market value is higher than its basis?
In the event that the fair market value exceeds the basis for a QOF investment of property, the difference is treated as a non-qualified investment, leading to "mixed investment" treatment. This doesn't necessarily result in adverse tax consequences, just an accounting nightmare.
The value is equal to the lesser of the taxpayer's basis in the transferred property or the fair market value of the taxpayer's QOF investment.
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