I80 day for the shareholder/member/partner begins to run when the tax return is due for the entity.
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When must an S. Corp, a partnership or beneficiaries of a trust invest the gains in a QOF or QOB?
I heard that it is not the standard 180 days after the date of the transaction. Why is it different?
Answers
It is different because of the IRS's grace in allowing flexibility for these taxpayers, which was mainly motivated by some taxpayers' lack of knowledge as to whether they even have capital gains until they receive a Schedule K-1. Keep in mind these taxpayers can only invest in QOFs and not directly in QOZBs. The 180-day timer now has three potential start dates after the final regulations: the date of the entity's recognition, the last date of the taxable year, or the due date of the entity's tax return (without regard to extensions).
When a capital gain is generated from a pass-through entity such as LLC or S Corp, you have 180 days from the due date without extension.
The rules for the actual S Corp or partnership are unchanged, but for the shareholders or partners, there are additional options. They can use the transaction date as day 1 of 180, the end of the entities taxable year as day 1 of 180 or the due date of the entity's tax return as day 1 of 180. This is because the investors in each of these, including a trust, may not be given real-time information to know that a gain has occurred or what portion of that gain will be allocated to them on their final return. The additional dates allow for an entity to provide this information to an investor by the due date of their tax return.
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