IRS Letters to QOF Investors Ask for More Information

Posted on Thu, Apr 28, 2022 ©2021 Drucker & Scaccetti

Location-GPSOn April 12, 2022, the IRS issued press release IR-2022-79, announcing it will send letters to taxpayers who may need to provide additional information about their Qualified Opportunity Fund (QOF) investments.


Taxpayers who attached Form 8996 to their QOF return may receive Letter 6501, Qualified Opportunity Fund Investment Standard, which informs the taxpayer information is needed to support the annual certification of investment standard. If the QOF intends to maintain its certification as a Qualified Opportunity Fund, it may need to take additional action to meet the annual self-certification of the investment standard requirement.


To correct the annual maintenance of the investment standard, the QOF should file an amended return or an Administrative Adjustment Request (AAR). If the QOF receives Letter 6501 and does not act, the IRS may refer the account for examination. Investors who elected to defer tax on gains invested in the QOF may also be subject to examination.


The IRS will also send Letter 6502, Reporting Qualified Opportunity Fund (QOF) Investments, and Letter 6503, Annual Reporting of Qualified Opportunity Fund (QOF) Investments to taxpayers who invested in QOFs. These letters notify taxpayers who filed  Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments that they may not have properly followed the instructions, as information is missing, invalid, or they may not have properly followed the requirements to maintain their qualifying investment in a QOF.


Like the remedies for Letter 6501, taxpayers who intend to maintain their qualifying investment in a QOF can file an amended return or an AAR with a properly completed Form 8997 attached. Failure to act may disqualify the investment in the QOF and the account may be referred for examination.


If you receive these QOF letters from the IRS, reach out to our Tax Warrior OZ Experts and we can assist with responding. For more information about QOFs, visit our Opportunity Zone Resource Center.


Topics: IRS, Qualified Opportunity Zones, Qualified Opportunity Funds

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