{"identifier":"/us/usc/t26/s1400Z\u20132","title":26,"num":"\u00a7\u202f1400Z\u20132.","heading":"Special rules for capital gains invested in opportunity zones","text":"\u00a7\u202f1400Z\u20132.\nSpecial rules for capital gains invested in opportunity zones\n(a)\nIn general\n(1)\nTreatment of gains\nIn the case of gain from the sale to, or exchange with, an unrelated person of any property held by the taxpayer, at the election of the taxpayer\u2014\n(A) gross income for the taxable year shall not include so much of such gain as does not exceed the aggregate amount invested by the taxpayer in a qualified opportunity fund during the 180-day period beginning on the date of such sale or exchange,\n(B) the amount of gain excluded by subparagraph (A) shall be included in gross income as provided by subsection (b), and\n(C) subsection (c) shall apply.\n(2)\nElection\nNo election may be made under paragraph (1)\u2014\n(A) with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect, or\n(B) with respect to any sale or exchange after\nDecember 31, 2026\n(b)\nDeferral of gain invested in opportunity zone property\n(1)\nYear of inclusion\nGain to which subsection (a)(1)(B) applies shall be included in income in the taxable year which includes the earlier of\u2014\n(A) the date on which such investment is sold or exchanged, or\n(B) December 31, 2026\n(2)\nAmount includible\n(A)\nIn general\nThe amount of gain included in gross income under subsection (a)(1)(A) shall be the excess of\u2014\n(i) the lesser of the amount of gain excluded under paragraph (1) or the fair market value of the investment as determined as of the date described in paragraph (1), over\n(ii) the taxpayer\u2019s basis in the investment.\n(B)\nDetermination of basis\n(i)\nIn general\nExcept as otherwise provided in this clause or subsection (c), the taxpayer\u2019s basis in the investment shall be zero.\n(ii)\nIncrease for gain recognized under subsection (a)(1)(B)\nThe basis in the investment shall be increased by the amount of gain recognized by reason of subsection (a)(1)(B) with respect to such property.\n(iii)\nInvestments held for 5 years\nIn the case of any investment held for at least 5 years, the basis of such investment shall be increased by an amount equal to 10 percent of the amount of gain deferred by reason of subsection (a)(1)(A).\n(iv)\nInvestments held for 7 years\nIn the case of any investment held by the taxpayer for at least 7 years, in addition to any adjustment made under clause (iii), the basis of such property shall be increased by an amount equal to 5 percent of the amount of gain deferred by reason of subsection (a)(1)(A).\n(c)\nSpecial rule for investments held for at least 10 years\nIn the case of any investment held by the taxpayer for at least 10 years and with respect to which the taxpayer makes an election under this clause, the basis of such property shall be equal to the fair market value of such investment on the date that the investment is sold or exchanged.\n(d)\nQualified opportunity fund\nFor purposes of this section\u2014\n(1)\nIn general\nThe term \u201cqualified opportunity fund\u201d means any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property, determined by the average of the percentage of qualified opportunity zone property held in the fund as measured\u2014\n(A) on the last day of the first 6-month period of the taxable year of the fund, and\n(B) on the last day of the taxable year of the fund.\n(2)\nQualified opportunity zone property\n(A)\nIn general\nThe term \u201cqualified opportunity zone property\u201d means property which is\u2014\n(i) qualified opportunity zone stock,\n(ii) qualified opportunity zone partnership interest, or\n(iii) qualified opportunity zone business property.\n(B)\nQualified opportunity zone stock\n(i)\nIn general\nExcept as provided in clause (ii), the term \u201cqualified opportunity zone stock\u201d means any stock in a domestic corporation if\u2014\n(I) such stock is acquired by the qualified opportunity fund after\nDecember 31, 2017\n(II) as of the time such stock was issued, such corporation was a qualified opportunity zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being a qualified opportunity zone business), and\n(III) during substantially all of the qualified opportunity fund\u2019s holding period for such stock, such corporation qualified as a qualified opportunity zone business.\n(ii)\nRedemptions\nA rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph.\n(C)\nQualified opportunity zone partnership interest\nThe term \u201cqualified opportunity zone partnership interest\u201d means any capital or profits interest in a domestic partnership if\u2014\n(i) such interest is acquired by the qualified opportunity fund after\nDecember 31, 2017\n(ii) as of the time such interest was acquired, such partnership was a qualified opportunity zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a qualified opportunity zone business), and\n(iii) during substantially all of the qualified opportunity fund\u2019s holding period for such interest, such partnership qualified as a qualified opportunity zone business.\n(D)\nQualified opportunity zone business property\n(i)\nIn general\nThe term \u201cqualified opportunity zone business property\u201d means tangible property used in a trade or business of the qualified opportunity fund if\u2014\n(I) such property was acquired by the qualified opportunity fund by purchase (as defined in section 179(d)(2)) after\nDecember 31, 2017\n(II) the original use of such property in the qualified opportunity zone commences with the qualified opportunity fund or the qualified opportunity fund substantially improves the property, and\n(III) during substantially all of the qualified opportunity fund\u2019s holding period for such property, substantially all of the use of such property was in a qualified opportunity zone.\n(ii)\nSubstantial improvement\nFor purposes of subparagraph (A)(ii), property shall be treated as substantially improved by the qualified opportunity fund only if, during any 30-month period beginning after the date of acquisition of such property, additions to basis with respect to such property in the hands of the qualified opportunity fund exceed an amount equal to the adjusted basis of such property (50 percent of such adjusted basis in the case of property in a qualified opportunity zone comprised entirely of a rural area (as defined in subsection (b)(2)(C)(ii))\n1\n1 So in original. A third closing parenthesis probably should appear.\n(iii)\nRelated party\nFor purposes of subparagraph (A)(i), the related person rule of section 179(d)(2) shall be applied pursuant to paragraph (8) of this subsection\n2\n2 So in original. This subsection does not contain a paragraph (8).\n(3)\nQualified opportunity zone business\n(A)\nIn general\nThe term \u201cqualified opportunity zone business\u201d means a trade or business\u2014\n(i) in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property (determined by substituting \u201cqualified opportunity zone business\u201d for \u201cqualified opportunity fund\u201d each place it appears in paragraph (2)(D)),\n(ii) which satisfies the requirements of paragraphs (2), (4), and (8) of section 1397C(b), and\n(iii) which is not described in section 144(c)(6)(B).\n(B)\nSpecial rule\nFor purposes of subparagraph (A), tangible property that ceases to be a qualified opportunity zone business property shall continue to be treated as a qualified opportunity zone business property for the lesser of\u2014\n(i) 5 years after the date on which such tangible property ceases to be so qualified, or\n(ii) the date on which such tangible property is no longer held by the qualified opportunity zone business.\n(e)\nApplicable rules\n(1)\nTreatment of investments with mixed funds\nIn the case of any investment in a qualified opportunity fund only a portion of which consists of investments of gain to which an election under subsection (a) is in effect\u2014\n(A) such investment shall be treated as 2 separate investments, consisting of\u2014\n(i) one investment that only includes amounts to which the election under subsection (a) applies, and\n(ii) a separate investment consisting of other amounts, and\n(B) subsections (a), (b), and (c) shall only apply to the investment described in subparagraph (A)(i).\n(2)\nRelated persons\nFor purposes of this section, persons are related to each other if such persons are described in section 267(b) or 707(b)(1), determined by substituting \u201c20 percent\u201d for \u201c50 percent\u201d each place it occurs in such sections.\n(3)\nDecedents\nIn the case of a decedent, amounts recognized under this section shall, if not properly includible in the gross income of the decedent, be includible in gross income as provided by section 691.\n(4)\nRegulations\nThe Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including\u2014\n(A) rules for the certification of qualified opportunity funds for the purposes of this section,\n(B) rules to ensure a qualified opportunity fund has a reasonable period of time to reinvest the return of capital from investments in qualified opportunity zone stock and qualified opportunity zone partnership interests, and to reinvest proceeds received from the sale or disposition of qualified opportunity zone property, and\n(C) rules to prevent abuse.\n(f)\nFailure of qualified opportunity fund to maintain investment standard\n(1)\nIn general\nIf a qualified opportunity fund fails to meet the 90-percent requirement of subsection (c)(1),\n(A) the excess of\u2014\n(i) the amount equal to 90 percent of its aggregate assets, over\n(ii) the aggregate amount of qualified opportunity zone property held by the fund, multiplied by\n(B) the underpayment rate established under section 6621(a)(2) for such month.\n(2)\nSpecial rule for partnerships\nIn the case that the qualified opportunity fund is a partnership, the penalty imposed by paragraph (1) shall be taken into account proportionately as part of the distributive share of each partner of the partnership.\n(3)\nReasonable cause exception\nNo penalty shall be imposed under this subsection with respect to any failure if it is shown that such failure is due to reasonable cause.","url":"https://projectusc.org/usc/t26/s1400Z\u20132.html","content":[{"t":"sec","id":"/us/usc/t26/s1400Z\u20132","children":[{"t":"num","text":"\u00a7\u202f1400Z\u20132."},{"t":"heading","text":"Special rules for capital gains invested in opportunity zones"},{"t":"subsec","id":"/us/usc/t26/s1400Z\u20132/a","children":[{"t":"num","text":"(a)"},{"t":"heading","text":"In general"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/a/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Treatment of gains"},{"t":"chapeau","text":"In the case of gain from the sale to, or exchange with, an unrelated person of any property held by the taxpayer, at the election of the taxpayer\u2014"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/a/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" gross income for the taxable year shall not include so much of such gain as does not exceed the aggregate amount invested by the taxpayer in a qualified opportunity fund during the 180-day period beginning on the date of such sale or exchange,","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/a/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" the amount of gain excluded by subparagraph (A) shall be included in gross income as provided by subsection (b), and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/a/1/C","children":[{"t":"num","text":"(C)"},{"t":"content","text":" subsection (c) shall apply.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/a/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Election"},{"t":"chapeau","text":"No election may be made under paragraph (1)\u2014"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/a/2/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect, or","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/a/2/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" with respect to any sale or exchange after ","children":[{"t":"text","text":"December 31, 2026","tail":"."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s1400Z\u20132/b","children":[{"t":"num","text":"(b)"},{"t":"heading","text":"Deferral of gain invested in opportunity zone property"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/b/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Year of inclusion"},{"t":"chapeau","text":"Gain to which subsection (a)(1)(B) applies shall be included in income in the taxable year which includes the earlier of\u2014"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/b/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" the date on which such investment is sold or exchanged, or","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/b/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" ","children":[{"t":"text","text":"December 31, 2026","tail":"."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/b/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Amount includible"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/b/2/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The amount of gain included in gross income under subsection (a)(1)(A) shall be the excess of\u2014"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/b/2/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" the lesser of the amount of gain excluded under paragraph (1) or the fair market value of the investment as determined as of the date described in paragraph (1), over","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/b/2/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" the taxpayer\u2019s basis in the investment.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/b/2/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Determination of basis"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/b/2/B/i","children":[{"t":"num","text":"(i)"},{"t":"heading","text":"In general"},{"t":"content","children":[{"t":"p","text":"Except as otherwise provided in this clause or subsection (c), the taxpayer\u2019s basis in the investment shall be zero.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/b/2/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"heading","text":"Increase for gain recognized under subsection (a)(1)(B)"},{"t":"content","children":[{"t":"p","text":"The basis in the investment shall be increased by the amount of gain recognized by reason of subsection (a)(1)(B) with respect to such property.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/b/2/B/iii","children":[{"t":"num","text":"(iii)"},{"t":"heading","text":"Investments held for 5 years"},{"t":"content","children":[{"t":"p","text":"In the case of any investment held for at least 5 years, the basis of such investment shall be increased by an amount equal to 10 percent of the amount of gain deferred by reason of subsection (a)(1)(A).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/b/2/B/iv","children":[{"t":"num","text":"(iv)"},{"t":"heading","text":"Investments held for 7 years"},{"t":"content","children":[{"t":"p","text":"In the case of any investment held by the taxpayer for at least 7 years, in addition to any adjustment made under clause (iii), the basis of such property shall be increased by an amount equal to 5 percent of the amount of gain deferred by reason of subsection (a)(1)(A).","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s1400Z\u20132/c","children":[{"t":"num","text":"(c)"},{"t":"heading","text":"Special rule for investments held for at least 10 years"},{"t":"content","children":[{"t":"p","text":"In the case of any investment held by the taxpayer for at least 10 years and with respect to which the taxpayer makes an election under this clause, the basis of such property shall be equal to the fair market value of such investment on the date that the investment is sold or exchanged.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s1400Z\u20132/d","children":[{"t":"num","text":"(d)"},{"t":"heading","text":"Qualified opportunity fund"},{"t":"chapeau","text":"For purposes of this section\u2014"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/d/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The term \u201cqualified opportunity fund\u201d means any investment vehicle which is organized as a corporation or a partnership for the purpose of investing in qualified opportunity zone property (other than another qualified opportunity fund) that holds at least 90 percent of its assets in qualified opportunity zone property, determined by the average of the percentage of qualified opportunity zone property held in the fund as measured\u2014"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/d/1/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" on the last day of the first 6-month period of the taxable year of the fund, and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/d/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" on the last day of the taxable year of the fund.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/d/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Qualified opportunity zone property"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/d/2/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The term \u201cqualified opportunity zone property\u201d means property which is\u2014"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" qualified opportunity zone stock,","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" qualified opportunity zone partnership interest, or","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/A/iii","children":[{"t":"num","text":"(iii)"},{"t":"content","text":" qualified opportunity zone business property.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/d/2/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Qualified opportunity zone stock"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/B/i","children":[{"t":"num","text":"(i)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"Except as provided in clause (ii), the term \u201cqualified opportunity zone stock\u201d means any stock in a domestic corporation if\u2014"},{"t":"subclause","id":"/us/usc/t26/s1400Z\u20132/d/2/B/i/I","children":[{"t":"num","text":"(I)"},{"t":"content","text":" such stock is acquired by the qualified opportunity fund after ","children":[{"t":"text","text":"December 31, 2017","tail":", at its original issue (directly or through an underwriter) from the corporation solely in exchange for cash,"}],"tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t26/s1400Z\u20132/d/2/B/i/II","children":[{"t":"num","text":"(II)"},{"t":"content","text":" as of the time such stock was issued, such corporation was a qualified opportunity zone business (or, in the case of a new corporation, such corporation was being organized for purposes of being a qualified opportunity zone business), and","tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t26/s1400Z\u20132/d/2/B/i/III","children":[{"t":"num","text":"(III)"},{"t":"content","text":" during substantially all of the qualified opportunity fund\u2019s holding period for such stock, such corporation qualified as a qualified opportunity zone business.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"heading","text":"Redemptions"},{"t":"content","children":[{"t":"p","text":"A rule similar to the rule of section 1202(c)(3) shall apply for purposes of this paragraph.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/d/2/C","children":[{"t":"num","text":"(C)"},{"t":"heading","text":"Qualified opportunity zone partnership interest"},{"t":"chapeau","text":"The term \u201cqualified opportunity zone partnership interest\u201d means any capital or profits interest in a domestic partnership if\u2014"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/C/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" such interest is acquired by the qualified opportunity fund after ","children":[{"t":"text","text":"December 31, 2017","tail":", from the partnership solely in exchange for cash,"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/C/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" as of the time such interest was acquired, such partnership was a qualified opportunity zone business (or, in the case of a new partnership, such partnership was being organized for purposes of being a qualified opportunity zone business), and","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/C/iii","children":[{"t":"num","text":"(iii)"},{"t":"content","text":" during substantially all of the qualified opportunity fund\u2019s holding period for such interest, such partnership qualified as a qualified opportunity zone business.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/d/2/D","children":[{"t":"num","text":"(D)"},{"t":"heading","text":"Qualified opportunity zone business property"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/D/i","children":[{"t":"num","text":"(i)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The term \u201cqualified opportunity zone business property\u201d means tangible property used in a trade or business of the qualified opportunity fund if\u2014"},{"t":"subclause","id":"/us/usc/t26/s1400Z\u20132/d/2/D/i/I","children":[{"t":"num","text":"(I)"},{"t":"content","text":" such property was acquired by the qualified opportunity fund by purchase (as defined in section 179(d)(2)) after ","children":[{"t":"text","text":"December 31, 2017","tail":","}],"tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t26/s1400Z\u20132/d/2/D/i/II","children":[{"t":"num","text":"(II)"},{"t":"content","text":" the original use of such property in the qualified opportunity zone commences with the qualified opportunity fund or the qualified opportunity fund substantially improves the property, and","tail":"\n"}],"tail":"\n"},{"t":"subclause","id":"/us/usc/t26/s1400Z\u20132/d/2/D/i/III","children":[{"t":"num","text":"(III)"},{"t":"content","text":" during substantially all of the qualified opportunity fund\u2019s holding period for such property, substantially all of the use of such property was in a qualified opportunity zone.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/D/ii","children":[{"t":"num","text":"(ii)"},{"t":"heading","text":"Substantial improvement"},{"t":"content","children":[{"t":"p","text":"For purposes of subparagraph (A)(ii), property shall be treated as substantially improved by the qualified opportunity fund only if, during any 30-month period beginning after the date of acquisition of such property, additions to basis with respect to such property in the hands of the qualified opportunity fund exceed an amount equal to the adjusted basis of such property (50 percent of such adjusted basis in the case of property in a qualified opportunity zone comprised entirely of a rural area (as defined in subsection (b)(2)(C)(ii))\u202f","children":[{"t":"ref","text":"1"},{"t":"num","text":"1","tail":"\u202fSo in original. A third closing parenthesis probably should appear."},{"t":"text","text":"\u202fSo in original. A third closing parenthesis probably should appear.","tail":" at the beginning of such 30-month period in the hands of the qualified opportunity fund."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/2/D/iii","children":[{"t":"num","text":"(iii)"},{"t":"heading","text":"Related party"},{"t":"content","children":[{"t":"p","text":"For purposes of subparagraph (A)(i), the related person rule of section 179(d)(2) shall be applied pursuant to paragraph (8) of this subsection\u202f","children":[{"t":"ref","text":"2"},{"t":"num","text":"2","tail":"\u202fSo in original. This subsection does not contain a paragraph (8)."},{"t":"text","text":"\u202fSo in original. This subsection does not contain a paragraph (8).","tail":" in lieu of the application of such rule in section 179(d)(2)(A)."}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/d/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Qualified opportunity zone business"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/d/3/A","children":[{"t":"num","text":"(A)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"The term \u201cqualified opportunity zone business\u201d means a trade or business\u2014"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/3/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" in which substantially all of the tangible property owned or leased by the taxpayer is qualified opportunity zone business property (determined by substituting \u201cqualified opportunity zone business\u201d for \u201cqualified opportunity fund\u201d each place it appears in paragraph (2)(D)),","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/3/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" which satisfies the requirements of paragraphs (2), (4), and (8) of section 1397C(b), and","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/3/A/iii","children":[{"t":"num","text":"(iii)"},{"t":"content","text":" which is not described in section 144(c)(6)(B).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/d/3/B","children":[{"t":"num","text":"(B)"},{"t":"heading","text":"Special rule"},{"t":"chapeau","text":"For purposes of subparagraph (A), tangible property that ceases to be a qualified opportunity zone business property shall continue to be treated as a qualified opportunity zone business property for the lesser of\u2014"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/3/B/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" 5 years after the date on which such tangible property ceases to be so qualified, or","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/d/3/B/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" the date on which such tangible property is no longer held by the qualified opportunity zone business.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s1400Z\u20132/e","children":[{"t":"num","text":"(e)"},{"t":"heading","text":"Applicable rules"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/e/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"Treatment of investments with mixed funds"},{"t":"chapeau","text":"In the case of any investment in a qualified opportunity fund only a portion of which consists of investments of gain to which an election under subsection (a) is in effect\u2014"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/e/1/A","children":[{"t":"num","text":"(A)"},{"t":"chapeau","text":" such investment shall be treated as 2 separate investments, consisting of\u2014"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/e/1/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" one investment that only includes amounts to which the election under subsection (a) applies, and","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/e/1/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" a separate investment consisting of other amounts, and","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/e/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" subsections (a), (b), and (c) shall only apply to the investment described in subparagraph (A)(i).","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/e/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Related persons"},{"t":"content","children":[{"t":"p","text":"For purposes of this section, persons are related to each other if such persons are described in section 267(b) or 707(b)(1), determined by substituting \u201c20 percent\u201d for \u201c50 percent\u201d each place it occurs in such sections.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/e/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Decedents"},{"t":"content","children":[{"t":"p","text":"In the case of a decedent, amounts recognized under this section shall, if not properly includible in the gross income of the decedent, be includible in gross income as provided by section 691.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/e/4","children":[{"t":"num","text":"(4)"},{"t":"heading","text":"Regulations"},{"t":"chapeau","text":"The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including\u2014"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/e/4/A","children":[{"t":"num","text":"(A)"},{"t":"content","text":" rules for the certification of qualified opportunity funds for the purposes of this section,","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/e/4/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" rules to ensure a qualified opportunity fund has a reasonable period of time to reinvest the return of capital from investments in qualified opportunity zone stock and qualified opportunity zone partnership interests, and to reinvest proceeds received from the sale or disposition of qualified opportunity zone property, and","tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/e/4/C","children":[{"t":"num","text":"(C)"},{"t":"content","text":" rules to prevent abuse.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subsec","id":"/us/usc/t26/s1400Z\u20132/f","children":[{"t":"num","text":"(f)"},{"t":"heading","text":"Failure of qualified opportunity fund to maintain investment standard"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/f/1","children":[{"t":"num","text":"(1)"},{"t":"heading","text":"In general"},{"t":"chapeau","text":"If a qualified opportunity fund fails to meet the 90-percent requirement of subsection (c)(1),","children":[{"t":"ref","text":"3"},{"t":"num","text":"3","tail":"\u202fSo in original. Probably should be \u201csubsection (d)(1),\u201d."},{"t":"text","text":"\u202fSo in original. Probably should be \u201csubsection (d)(1),\u201d.","tail":" the qualified opportunity fund shall pay a penalty for each month it fails to meet the requirement in an amount equal to the product of\u2014"}]},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/f/1/A","children":[{"t":"num","text":"(A)"},{"t":"chapeau","text":" the excess of\u2014"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/f/1/A/i","children":[{"t":"num","text":"(i)"},{"t":"content","text":" the amount equal to 90 percent of its aggregate assets, over","tail":"\n"}],"tail":"\n"},{"t":"clause","id":"/us/usc/t26/s1400Z\u20132/f/1/A/ii","children":[{"t":"num","text":"(ii)"},{"t":"content","text":" the aggregate amount of qualified opportunity zone property held by the fund, multiplied by","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"subpara","id":"/us/usc/t26/s1400Z\u20132/f/1/B","children":[{"t":"num","text":"(B)"},{"t":"content","text":" the underpayment rate established under section 6621(a)(2) for such month.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/f/2","children":[{"t":"num","text":"(2)"},{"t":"heading","text":"Special rule for partnerships"},{"t":"content","children":[{"t":"p","text":"In the case that the qualified opportunity fund is a partnership, the penalty imposed by paragraph (1) shall be taken into account proportionately as part of the distributive share of each partner of the partnership.","tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"para","id":"/us/usc/t26/s1400Z\u20132/f/3","children":[{"t":"num","text":"(3)"},{"t":"heading","text":"Reasonable cause exception"},{"t":"content","children":[{"t":"p","text":"No penalty shall be imposed under this subsection with respect to any failure if it is shown that such failure is due to reasonable cause.","tail":"\n"}],"tail":"\n"}],"tail":"\n"}],"tail":"\n"},{"t":"text","text":"\n"},{"t":"text","text":"\n"}]}]}