• For investments in a QOF taxed as a partnership, the amount of the gains included in the partner’s tax return is the excess over the outside basis of the interest in the partnership. This outside basis starts at zero, but can be increased due to debt and net income taxable to the partner.

• The triggering of inclusion of a portion of the gains before the fifth year of the investment does not affect the stepped-up basis in the remaining invested gains which remain invested in the QOF or QOB.

• Neither a QSST election nor an ESBT election for subchapter S. Corporation stockholders, is an inclusion event. 

None of these final regulations change the due diligence questions that an investor and their advisor need to consider, including:

• The investor is an accredited investor,

• The investor files form 8949 annually,

• The investor is clear on the timeline for deferral and the stepped-up basis,

• The investor understands how the 180-day rule works,

• The investor understands how funds must be invested to qualify for deferral,

• The investor understands what is, and is not, an inclusion event,