There is an interest charge.
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What is the penalty for failure to meet the 90% asset test?
Do I have options to fulfill the requirements?
Answers
The penalty is payable monthly, measured by the federal underpayment rate applied to the value of the assets below 90% that are not qualified. For instance, if the QOF has only 50% qualified assets, you take 40% of the value of the QOF's total assets and apply the underpayment rate every month to calculate the penalties.
The penalty is computed using the federal interest rate during the period the requirement is not met on form 8996. There are special safe harbors in case funds have being received close to test date and for proceeds received by the fund.
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