Good question. I believe the working capital rules would provide relief.
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What happens if a QOF sells QOZ property right before the 90% testing date?
Is there any flexibility to reinvest the proceeds back into a QOZ? How much time would I have?
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There's flexibility to reinvest. The proposed regulations allow you a year, but normal federal income tax consequences apply to the sale itself. This should spur QOF owners to look into the possibility of Section 1031 exchanges or the like to allow tax-deferred reinvestment of capital ahead of the 10-year mark.
The second set of regulations provides 12 months for reinvestment as long as the proceeds are kept in cash, cash equivalents or debt instruments of 18 months or less.
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