Basis rises 10 percent after five years, or 30 percent for a rural fund
What the document says“the basis of such investment shall be increased by an amount equal to 10 percent (30 percent in the case of any investment in a qualified rural opportunity fund) of the amount of gain deferred by reason of subsection (a)(1)(A).”
The section raises the basis of an investment held at least five years by 10 percent of the gain deferred, or 30 percent where the investment is in a qualified rural opportunity fund, and treats that increase as occurring before the five year inclusion date.
What the document actually says“the basis of such investment shall be increased by an amount equal to 10 percent (30 percent in the case of any investment in a qualified rural opportunity fund) of the amount of gain deferred by reason of subsection (a)(1)(A).”
The value on the books rises after five years. The rise is 10 percent of the gain put off. For a rural fund it is 30 percent.
A higher basis means less gain to tax. The rural rate is three times the normal one. The rise counts before the gain is brought in.
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