Generally, the statute and regulations allow the income tax exclusion (by way of basis adjustment) to apply to both sales of QOF equity and sales of QOF assets, but in all cases, the QOF equity must have been held by the taxpayer for ten or more years. This does not necessarily apply to the QOF assets. Theoretically, a QOF held by all investors for ten or more years can acquire an asset and sell it two years later while achieving the income tax exclusion. However, to the extent any taxpayer has not held her QOF interest for more than ten years, she would recognize regular income tax consequences upon any sale.
