A new 180-day timer starts for every installment, so the rules are quite generous and should give you the leeway to invest each installment in a QOF as you see fit.
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If my sales proceeds will be paid out in installments, how can I reinvest my capital gains in a QOF?
Answers
As long as it is capital gains, you would invest within 180 days of each installment provided you are eligible to and are using the installment sale method, which are rules outside of OZ rules (i.e., general tax law).
If you report the gains on the installment method, then the start of the 180-day period to invest the portion of gain corresponding to each payment can be (at your election) either (i) the payment date, or (ii) the end of the tax year in which the payment is made. In this case, each payment (or payments made in the same tax year) would have a separate 180-day period. Alternatively, you could elect out of the installment method and start the 180-day period for the entire gain on the date of the sale.
Taxpayers with installment sales can elect a 180-day investment period on the date payment is received or the last day of the tax year that the gain would otherwise be recognized. You could have multiple opportunities to invest in numerous timeframes in this example. To maximize an up-front investment, is there an option to elect out of installment sale reporting and then separately defer under 1400Z?
The regulations allow for the deferral of installment capital gains. You will need to invest in a QOF when the installment is received within the 180 days period.
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