There is a list in the regulations that details what the inclusion events are and what are not. You must navigate this with a tax expert. A foot fault here could spell disaster. Some inclusion events on the list are otherwise income tax-free.
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What counts as an inclusion event in my QOF?
I want to make sure I am not terminating my qualifying investment in the QOF. What should I think about?
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The regulations contain very detailed rules on the types of transactions that are said to be "inclusion events." In general, a taxpayer should seek the assistance of a tax professional before (i) making any transfer of a qualifying investment of a QOF (even if the transfer would otherwise be tax-free, such as a gift), (ii) receiving a distribution from the QOF, or (iii) claiming a worthlessness deduction for the qualifying investment. Not every transaction described in the foregoing will necessarily constitute an inclusion event, but the various exceptions are too involved to discuss here. In addition, a loss by a QOF of its qualification as such will also be an inclusion event.
There is a long list of inclusion events. Keep in mind that if there is a change in the control of the investment, it might be a triggering event.
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