Qualified Opportunity Zone investments: deferring and excluding capital gains

Figures are for tax year 2026. This Guide is for an investor with a large capital gain who is thinking about a qualified opportunity fund, and for their adviser. It covers federal law only: sections 1400Z-1 and 1400Z-2 of the Internal Revenue Code as amended by section 70421 of Public Law 119-21, approved on 4 July 2025 (text on govinfo.gov). States decide for themselves whether to follow these rules. Two sets of rules now run side by side, and this Guide keeps them apart:

• Original rules: amounts invested in a qualified opportunity fund on or before 31 December 2026.
• New rules: amounts invested in a qualified opportunity fund after 31 December 2026, that is from 1 January 2027.

Related Guides: general capital gains rates and holding periods are in us-capital-gains; the small business stock exclusion is in us-section-1202-qsbs; real property exchanges are in us-federal-section-1031-like-kind-exchange; the short summary of all 2026 federal changes is in us-2026-federal-tax-changes. This Guide stops at the edge of each of those topics.

Which rules apply to an investment

The test is the date the money goes into the fund, not the date of the sale that produced the gain. The Act says its changes to section 1400Z-2(a), (b) and (c) "shall apply to amounts invested in qualified opportunity funds after December 31, 2026" (section 70421(c)(5)(A), text on govinfo.gov). Three parts of section 70421 have their own start dates, set out in the same paragraph:

• The rural substantial improvement rule (below) took effect on 4 July 2025, the date of enactment, whichever rules the investor is under.
• The new acquisition date rules for property a fund or zone business buys apply to property acquired after 31 December 2026.
• The new fund reporting and penalty rules apply to taxable years beginning after 4 July 2025 (section 70421(d)(5)). They bind funds, whichever rules their investors are under.

A gain from a sale in late 2026 whose 180-day window runs into 2027 can be invested on either side of the line. Money that goes in on or before 31 December 2026 is under the original rules. Money that goes in from 1 January 2027 is under the new rules by the Act's effective-date rule. But whether a deferral election can be made at all for a gain from a sale before 2027 is not settled: the regulations define a deferral election as one "made before January 1, 2027" (26 CFR 1.1400Z2(a)-1(b)(10)) and have not been updated for the Act. Refer that case (see "When to refuse or refer") rather than advise it.

Original rules: investments made on or before 31 December 2026

Getting in: the 180-day window

1. Under the original rules, gross income does 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", if the taxpayer elects (26 U.S.C. 1400Z-2(a)(1), LII mirror of the U.S. Code). Only the part of the gain actually invested is deferred.
2. The gain must be treated as a capital gain or be a qualified section 1231 gain, it must be gain that would be taxed before 1 January 2027 without the election, and it must not come from a sale to a related person as the regulations define it (26 CFR 1.1400Z2(a)-1(b)(11)). Ordinary income does not qualify. Gain from a section 1256 contract, and gain from a position that was part of a straddle, is also excluded, subject to exceptions in the regulations (26 CFR 1.1400Z2(a)-1(b)(11)(vi), same link).
3. The election is made on the return for the year the gain would otherwise be taxed, using Form 8949. A return already filed is amended to make it (IRS Opportunity Zones FAQ, Q14 and Q16).

The 2026 inclusion: the big event this year

Under the original rules the deferral ends on 31 December 2026 at the latest. The pre-2027 text of section 1400Z-2(b)(1) reads: "Gain to which subsection (a)(1)(B) applies shall be included in income in the taxable year which includes the earlier of" "(A) the date on which such investment is sold or exchanged, or (B) December 31, 2026" (26 U.S.C. 1400Z-2(b)(1), LII mirror of the U.S. Code). The regulations say the same: the gain is included "in the taxable year that includes the earlier of" an inclusion event or 31 December 2026 (26 CFR 1.1400Z2(b)-1(b)).

What that means, rule by rule:

• A calendar-year investor who still holds an original-rules investment on 31 December 2026 reports the remaining deferred gain on the 2026 return, filed in 2027. No sale and no cash are needed. The tax must be paid from other money.
• A fiscal-year investor reports it in the taxable year that includes 31 December 2026.
• If an inclusion event (for example a sale, or the fund liquidating) happens earlier, the gain is reported in the year of that event instead (IRS Opportunity Zones FAQ, Q30 and Q32).
• An investment made during 2026 under the original rules defers nothing past the 2026 return. Its only remaining tax benefit is the 10-year election below.

The amount included on 31 December 2026 is the excess of the lesser of (a) the remaining deferred gain and (b) the fair market value of the qualifying investment on 31 December 2026, over the investor's basis in it on that date, counting only the basis rules in section 1400Z-2(b)(2)(B) (26 CFR 1.1400Z2(b)-1(e)(3)). Basis starts at zero (26 U.S.C. 1400Z-2(b)(2)(B)(i), LII mirror of the U.S. Code). If the investment has fallen in value below the deferred gain, less is included.

Basis step-ups under the original rules: which still count

Source	all figures below	https://www.law.cornell.edu/uscode/text/26/1400Z-2
Rule (original rules, investments made on or before 31 December 2026)	Figure	Note (LII mirror of the U.S. Code, pre-2027 text)
Basis increase, investment held at least 5 years	10 percent	"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"
Further basis increase, investment held at least 7 years	5 percent	"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"
Fund asset test (both sets of rules)	90 percent	"holds at least 90 percent of its assets in qualified opportunity zone property"

The two step-ups add together, so an investment held at least 7 years gets both (the IRS describes the result as an exclusion that "becomes 15%", IRS Opportunity Zones FAQ). Because the 2026 inclusion uses basis on 31 December 2026, a step-up reduces that inclusion only if the holding period has reached 5 years (or 7 years) by 31 December 2026 (26 CFR 1.1400Z2(b)-1(e)(3)). So:

• An investment made in 2022 or later cannot reach 5 years by 31 December 2026. It gets no step-up.
• An investment made in 2020 or later cannot reach 7 years by 31 December 2026. It gets at most the 5-year step-up.
• For an investment made on the last day of 2019 or 2021, how the holding period is counted (26 CFR 1.1400Z2(b)-1(d)) decides the answer. Check it on the facts.

After 2026: the 10-year election under the original rules

After the 2026 inclusion, basis is increased by the gain included (26 U.S.C. 1400Z-2(b)(2)(B)(ii), LII mirror of the U.S. Code). Under the original section 1400Z-2(c), for "any investment held by the taxpayer for at least 10 years and with respect to which the taxpayer makes an election", basis is "equal to the fair market value of such investment on the date that the investment is sold or exchanged" (26 U.S.C. 1400Z-2(c), LII mirror of the U.S. Code). That removes tax on the growth of the investment. It does not undo the 2026 inclusion. The election applies only to the part of an investment that came from deferred gain; other money in the same fund is a separate investment (26 U.S.C. 1400Z-2(e)(1); IRS Opportunity Zones FAQ, Q25).

The regulations protect the election when a zone's designation ends, but that protection "does not apply to elections under section 1400Z-2(c) that are related to dispositions occurring after December 31, 2047" (26 CFR 1.1400Z2(c)-1(c)). Plan an original-rules exit on or before 31 December 2047. The Act's 30-year rule below does not apply to original-rules investments, because it covers only amounts invested after 31 December 2026.

New rules: investments made after 31 December 2026

The zones

• New zones are chosen in rounds. The "decennial determination date" means "July 1, 2026, and" "each July 1 of the year that is 10 years after the preceding decennial determination date" (26 U.S.C. 1400Z-1(c)(2)(C), LII mirror of the U.S. Code).
• A zone designated after 4 July 2025 stays in effect from its "applicable start date", which is "the January 1 following the date on which such qualified opportunity zone was certified and designated", to "the day before the date that is 10 years after the applicable start date" (26 U.S.C. 1400Z-1(e), LII mirror of the U.S. Code).
• Zones designated under the original law ran "for the period beginning on the date of the designation and ending at the close of the 10th calendar year beginning on or after such date of designation" (prior text, quoted in the notes on the same LII page). The first were designated on 9 April 2018 (IRS Opportunity Zones FAQ, Q3).
• For property acquired after 31 December 2026, zone business property must be bought after the applicable start date of its zone (section 70421(c)(4)(A) and (c)(5)(B), text on govinfo.gov).
• Whether a given census tract is in a zone in a given year comes from the Treasury list for that round. This Guide does not carry the list.

The test for which tracts may be nominated in the new rounds:

Source	all figures below	https://www.law.cornell.edu/uscode/text/26/1400Z-1
Rule (new rules, areas designated after 4 July 2025)	Figure	Note (LII mirror of the U.S. Code)
Low-income community, median family income test (either test qualifies)	70 percent	"does not exceed 70 percent of the statewide median family income"
Low-income community, poverty rate test, which also needs the next row	20 percent	"has a poverty rate of at least 20 percent, and"
Median family income cap that goes with the poverty test	125 percent	"does not exceed 125 percent of the statewide median family income"
Most tracts a State may designate during any period (a State with fewer than 100 low-income communities may designate 25 tracts)	25 percent	"may not exceed 25 percent of the number of low-income communities in the State"

For a tract inside a metropolitan area, the income comparisons use the metropolitan area median family income instead of the statewide figure (same page).

Getting in

The 180-day window in section 1400Z-2(a)(1) is unchanged. The sunset is gone: the new election text says only that "No election may be made under paragraph (1) with respect to a sale or exchange if an election previously made with respect to such sale or exchange is in effect" (section 70421(c)(1), text on govinfo.gov).

Deferral: five years from the date of each investment

For amounts invested after 31 December 2026, deferred gain "shall be included in gross income in the taxable year which includes the earlier of" (A) "the date on which such investment is sold or exchanged, or" (B) "the date which is 5 years after the date the investment in the qualified opportunity fund was made" (new section 1400Z-2(b)(1), text on govinfo.gov). Each investment has its own date. The amount included is the lesser of the deferred gain or the fair market value of the investment on that date, minus basis (new section 1400Z-2(b)(2)(A)). Basis starts at zero.

Basis increase at five years, and rural funds

Source	all figures below	https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
Rule (new rules unless the row says otherwise)	Figure	Note (Public Law 119-21, section 70421)
Basis increase, investment held at least 5 years, ordinary fund	10 percent	"shall be increased by an amount equal to 10 percent (30 percent in the case of any investment in a qualified rural opportunity fund)"
Basis increase, investment held at least 5 years, qualified rural opportunity fund	30 percent	"10 percent (30 percent in the case of any investment in a qualified rural opportunity fund)"
Qualified rural opportunity fund: share of assets in rural zone property	90 percent	"a qualified opportunity fund that holds at least 90 percent of its assets in qualified opportunity zone property which"
Substantial improvement, property in a zone made up entirely of a rural area (from 4 July 2025, both sets of rules)	50 percent	"(50 percent of such adjusted basis in the case of property in a qualified opportunity zone comprised entirely of a rural area"

The increase is "treated as occurring before the date described in paragraph (1)(B)", so it reduces the gain included at the 5-year date (new section 1400Z-2(b)(2)(B)(iii)(II)). There is no 7-year step-up under the new rules: the new text has only the 5-year clause. A "rural area" is "any area other than" "a city or town that has a population of greater than 50,000 inhabitants, and" "any urbanized area contiguous and adjacent to" such a city or town (new section 1400Z-2(b)(2)(C)(ii)).

Ten years, and the 30-year cap

For an investment held at least 10 years with an election, the new section 1400Z-2(c) sets basis at "the fair market value of such investment on the date such investment is sold or exchanged" for "an investment sold before the date that is 30 years after the date of the investment", and "in any other case, the fair market value of such investment on the date that is 30 years after the date of the investment" (section 70421(c)(3), text on govinfo.gov). Growth after the 30th anniversary is taxable on sale. This cap applies only to amounts invested after 31 December 2026.

What a qualified opportunity fund is (both sets of rules)

• A fund is a corporation or partnership organised to invest in qualified opportunity zone property that holds at least 90 percent of its assets in that property (the 90 percent in the original-rules table above), measured as the average of the percentage "on the last day of the first 6-month period of the taxable year of the fund, and" "on the last day of the taxable year of the fund" (26 U.S.C. 1400Z-2(d)(1), LII mirror of the U.S. Code).
• A fund that misses the test pays a monthly penalty on the shortfall at the underpayment rate unless the failure is due to reasonable cause (section 1400Z-2(f)(1) and (f)(3), same page). The investor does not pay it, but it reduces the fund.
• A fund self-certifies by "annually filing Form 8996 with its federal income tax return", and that return "must be filed timely, taking extensions into account" (IRS Opportunity Zones FAQ, Q38). Ask for the fund's Form 8996 history before investing.
• For tangible property, the IRS reads the two "substantially all" tests as at least 90 percent of the holding period and at least 70 percent of the use, in answers the IRS says "do not constitute legal authority and may not be relied upon as such" (IRS Opportunity Zones FAQ, Q52). See the FAQ table below.

The substantial improvement test for existing property

Property a fund buys that is already in use counts as zone business property only if it is substantially improved. Under section 1400Z-2(d)(2)(D)(ii), "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" at the start of that period (26 U.S.C. 1400Z-2(d)(2)(D)(ii), LII mirror of the U.S. Code). The additions must exceed that amount; equalling it fails. For property in a zone made up entirely of a rural area, the bar is 50 percent of adjusted basis (table above), from 4 July 2025, under both sets of rules.

Reporting

Investors: Form 8997 every year (both sets of rules)

An investor uses Form 8997 "to inform the IRS of the QOF investments and deferred gains held at the beginning and end of the current tax year, as well as any capital gains deferred by investing in a QOF and QOF investments disposed of during the current tax year" (About Form 8997, irs.gov). File it for every year the investor held a fund investment at any point, attached to the timely filed return. The 2026 return of an original-rules investor shows the 2026 inclusion on Form 8997 and Form 8949.

Funds: new returns and penalties (taxable years beginning after 4 July 2025)

Every fund files an annual return under new section 6039K (assets, zone property, census tracts, employees, and each investor who disposed of an investment), gives a statement to each investor who disposed, and files it electronically. Zone businesses must give their funds the information they need (section 6039L). A fund that fails to file "a complete and correct return" pays a daily penalty under new section 6726 (section 70421(d), text on govinfo.gov). The penalty falls on the fund that must file, not on the investor. It applies to funds' taxable years beginning after 4 July 2025, whichever rules their investors are under.

Source	all figures below	https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
Penalty under section 6726, as the Act prints it	Figure	Note (Public Law 119-21, section 70421(d)(2))
Per day while the failure continues	USD 500	"such person shall pay a penalty of $500 for each day during which such failure continues"
Most for any one return	USD 10,000	"on failures with respect to any 1 return shall not exceed $10,000"
Gross assets above which the higher cap applies (last day of the taxable year)	USD 10,000,000	"are in excess of $10,000,000, paragraph (1) shall be applied by substituting $50,000' for $10,000'"
Higher cap for those large funds	USD 50,000	"by substituting $50,000' for $10,000'"
Per day, intentional disregard	USD 2,500	"subsection (a) shall be applied by substituting $2,500' for $500'"
Most for any one return, intentional disregard, ordinary fund	USD 50,000	"subsection (b)(1) shall be applied by substituting $50,000' for $10,000'"
Large fund cap, intentional disregard	USD 250,000	"subsection (b)(2) shall be applied by substituting $250,000' for $50,000'"

The Act indexes these amounts. The Act's indexing clause starts with "a return required to be filed in a calendar year beginning after 2025"; Rev. Proc. 2025-32 section 2.16 says the amounts "are adjusted for inflation for returns required to be filed in calendar years beginning after 2026" and prints figures only for 2027. For a return required to be filed in 2026 this Guide states no amount; refer. For returns required to be filed in 2027, which includes a calendar-year fund's 2026 return, the IRS prints these amounts:

Source	all figures below	https://www.irs.gov/pub/irs-drop/rp-25-32.pdf
Penalty under section 6726, returns required to be filed in 2027	Figure	Note (Rev. Proc. 2025-32, section 4.59)
Per day	USD 510	"is $510 per day with a maximum penalty of $10,000 per return"
Most for any one return	USD 10,000	"$510 per day with a maximum penalty of $10,000 per return"
Higher cap, large fund	USD 51,000	"($51,000 if the gross assets of the fund are greater than $10,230,000)"
Gross assets threshold for the higher cap	USD 10,230,000	"if the gross assets of the fund are greater than $10,230,000"
Per day, intentional disregard	USD 2,550	"then the penalty is $2,550 per day"
Most for any one return, intentional disregard	USD 51,000	"then the penalty is $2,550 per day with a maximum penalty is $51,000 per return"
Large fund cap, intentional disregard	USD 255,000	"($255,000 if the gross assets of the fund are greater than $10,230,000)"

IRS reading of the fund tests

Source	all figures below	https://www.irs.gov/credits-deductions/opportunity-zones-frequently-asked-questions
Rule (regime as each row says)	Figure	Note (IRS Opportunity Zones FAQ, which the IRS says "do not constitute legal authority and may not be relied upon as such")
Original rules: 5-year plus 7-year step-ups together	15%	"If held for at least 7 years, the 10% exclusion becomes 15%."
Original rules: 5-year step-up as the IRS words it	10%	"If the QOF investment is held for at least 5 years, there is a 10% exclusion of the deferred gain."
Tangible property: share of the holding period	90 percent	"The first of these two “substantially all” references means at least 90 percent"
Tangible property: share of use in a zone	70 percent	"and the second means at least 70 percent"

Worked examples (hypothetical amounts)

All amounts in these examples are hypothetical. Each investor is an individual on a calendar year who makes the deferral election and invests the whole gain.

Example 1: original rules, invested in 2021

Source	all figures below	https://www.law.cornell.edu/uscode/text/26/1400Z-2
Step	Amount	Note
Capital gain from a stock sale on 1 March 2021, invested in a fund on 15 June 2021, inside 180 days (hypothetical)	USD 1,000,000	original rules; held more than 5 but less than 7 years on 31 December 2026
Fair market value of the investment on 31 December 2026 (hypothetical)	USD 1,400,000	higher than the deferred gain, so the deferred gain is the lesser amount
5-year step-up: 10 percent of USD 1,000,000	USD 100,000	no 7-year step-up: 7 years not reached by 31 December 2026
Gain included on the 2026 return: USD 1,000,000 minus USD 100,000	USD 900,000	26 CFR 1.1400Z2(b)-1(e)(3)
Basis after the inclusion: USD 100,000 plus USD 900,000	USD 1,000,000	section 1400Z-2(b)(2)(B)(ii)
Sold in 2033, after 10 years, for USD 2,000,000 with the 10-year election (hypothetical)	USD 2,000,000	basis becomes fair market value at sale, so no gain on the sale; dispose on or before 31 December 2047

Without the election, the 2033 sale would produce a gain of USD 1,000,000 (USD 2,000,000 minus basis of USD 1,000,000).

Example 2: original rules, invested in 2026

Source	all figures below	https://www.ecfr.gov/current/title-26/section-1.1400Z2%28b%29-1
Step	Amount	Note
Capital gain from a sale on 2 March 2026, invested in a fund on 1 May 2026 (hypothetical)	USD 500,000	original rules: invested before 1 January 2027
Fair market value of the investment on 31 December 2026 (hypothetical)	USD 450,000	lower than the deferred gain
Step-ups	none	held far less than 5 years on 31 December 2026
Gain included on the 2026 return: the lesser of USD 500,000 and USD 450,000, minus zero basis	USD 450,000	26 CFR 1.1400Z2(b)-1(e)(3)

The gain is deferred only from the date of sale to the end of the same year. If the investment had been worth at least USD 500,000 on 31 December 2026, the whole USD 500,000 would be included.

Example 3: new rules, invested in 2027

Source	all figures below	https://www.govinfo.gov/content/pkg/PLAW-119publ21/html/PLAW-119publ21.htm
Step	Amount	Note
Capital gain from a sale in January 2027, invested in a fund on 1 March 2027 (hypothetical)	USD 1,000,000	new rules: invested after 31 December 2026
Fair market value on 1 March 2032, the date 5 years after the investment (hypothetical)	USD 1,500,000	higher than the deferred gain
Ordinary fund: 5-year basis increase, 10 percent of USD 1,000,000	USD 100,000	treated as made before the 5-year date
Ordinary fund: gain included on the 2032 return, USD 1,000,000 minus USD 100,000	USD 900,000	new section 1400Z-2(b)(1)(B) and (b)(2)(A)
Qualified rural opportunity fund: 5-year basis increase, 30 percent of USD 1,000,000	USD 300,000	rural fund only
Qualified rural opportunity fund: gain included on the 2032 return, USD 1,000,000 minus USD 300,000	USD 700,000	same rules

If the investor holds past 1 March 2037 (10 years) and elects, basis becomes fair market value at sale for a sale before 1 March 2057 (30 years). For a sale on or after that date, basis is the fair market value on 1 March 2057.

Who should not do this

• Anyone who needs the money back within 10 years. The exclusion of growth needs the 10-year holding period and the election.
• An investor who cannot pay the deferred tax from other money: on the 2026 return for original-rules investments, and in the year that includes the 5-year date for new-rules investments.
• Someone hoping to defer a 2026 gain by investing in 2026: under the original rules it is included on the same 2026 return (Example 2).
• An investor whose gain is ordinary income, or comes from a sale to a related person: it is not eligible (26 CFR 1.1400Z2(a)-1(b)(11)).
• A foreign investor who will not waive treaty benefits on the later inclusion: Form 8997 says such an investor "may not elect to defer tax on an eligible gain by investing in a QOF" without the waiver (Form 8997, irs.gov).
• Anyone choosing a fund that cannot show its Form 8996 filings and how it meets the 90 percent test.

The method, step by step

1. Fix the gain: amount, date of sale, capital or section 1231 character, and the buyer's relationship to the seller (26 CFR 1.1400Z2(a)-1).
2. Count 180 days from the date of sale and note the date the money goes in. On or before 31 December 2026: original rules. From 1 January 2027: new rules (section 70421(c)(5)(A), text on govinfo.gov). A gain from a sale before 2027 invested in 2027 is the unsettled case in "When to refuse or refer".
3. Check the fund: it self-certifies on Form 8996 and meets the 90 percent asset test (26 U.S.C. 1400Z-2(d)(1), LII mirror of the U.S. Code); for the 30 percent rural increase, that it is a qualified rural opportunity fund (text on govinfo.gov).
4. Make the deferral election on Form 8949 with the return for the year of sale, and file Form 8997 (About Form 8997, irs.gov).
5. Original-rules investments still held: compute the 2026 inclusion as the lesser of remaining deferred gain and fair market value on 31 December 2026, minus basis, counting only step-ups whose holding period is reached by that date (26 CFR 1.1400Z2(b)-1). Report it on the 2026 return with Form 8949 and Form 8997, and plan the cash for the tax.
6. New-rules investments: diary the date 5 years after each investment. Compute the inclusion for the taxable year that includes that date, after the 10 percent or 30 percent increase (text on govinfo.gov).
7. File Form 8997 every year the investment is held, until it is gone (About Form 8997, irs.gov).
8. At sale after 10 years, make the section 1400Z-2(c) election. Original rules: dispose on or before 31 December 2047 (26 CFR 1.1400Z2(c)-1). New rules: basis is capped at fair market value on the 30th anniversary (text on govinfo.gov).

Ask the client first

• On what date did you sell, and on what date did (or will) the money go into the fund? The second date decides which rules apply.
• Do you already hold a fund investment made before 2027? If so, on what date was it made, and what is it likely to be worth on 31 December 2026?
• Can you pay the tax on the deferred gain from other money when it falls due?
• Is the gain capital or section 1231 gain, and was the buyer related to you?
• Will you need this money back within 10 years?
• Is the fund (or the zone business it invests in) rural, and does it hold existing buildings it must substantially improve?

When to refuse or refer

• State tax. States decide for themselves whether to follow these rules; this Guide is federal only.
• A 2026 sale invested in 2027 under the new rules. The statute allows it, but the regulations still define a deferral election as one "made before January 1, 2027" (26 CFR 1.1400Z2(a)-1(b)(10)) and have not been updated for the Act. Refer to an adviser who has checked for new IRS guidance.
• Partnership, S corporation, trust or estate gains, installment sales, and gains passed through to the investor: the 180-day period can start on a different date. Refer.
• Gifts, transfers on divorce, distributions from a fund partnership, and other inclusion events before the scheduled date (IRS Opportunity Zones FAQ, Q31 to Q36). Refer.
• Fund managers on fund-level compliance (Form 8996, the 90 percent test, section 6039K returns, working capital and other fund-level rules in the regulations). Refer.
• Holding-period boundary days for the 5-year and 7-year step-ups under the original rules. Refer.
• Questions about QSBS, section 1031 exchanges or capital gains rates: use us-section-1202-qsbs, us-federal-section-1031-like-kind-exchange and us-capital-gains.

Sources

• Public Law 119-21 (One Big Beautiful Bill Act), text on govinfo.gov, section 70421
• 26 U.S.C. 1400Z-2, LII mirror of the U.S. Code
• 26 U.S.C. 1400Z-1, LII mirror of the U.S. Code
• 26 CFR 1.1400Z2(a)-1, eCFR
• 26 CFR 1.1400Z2(b)-1, eCFR
• 26 CFR 1.1400Z2(c)-1, eCFR
• IRS Opportunity Zones frequently asked questions
• About Form 8997, irs.gov
• Form 8997, irs.gov
• Rev. Proc. 2025-32, irs.gov