SECTION 2. BACKGROUND

.01 Section 1397B, as added by § 116 of the Community Renewal Tax Relief Act of 2000, Pub. L. No. 106–554, 114 Stat. 2763 (December 21, 2000), generally allows a taxpayer to elect to rollover the gain realized from the sale of a QEZ asset purchased after December 21, 2000, and held for more than one year. If the taxpayer makes the election under § 1397B as provided in this revenue procedure, gain from that sale is recognized only to the extent that the amount realized on the sale exceeds (1) the cost of any QEZ asset purchased by the taxpayer in the same zone as the sold QEZ asset during the 60-day period beginning on the date of the sale of the QEZ asset, reduced by (2) any portion of the cost of any replacement QEZ asset referred to in section 2.01(1) of this revenue procedure that was previously taken into account under § 1397B. However, pursuant to § 1397B(b)(2), the election is not available to defer any gain that is: (1) treated as

ordinary income for purposes of subtitle A of the Code; or (2) attributable to real property or an intangible asset neither of which is an integral part of an enterprise zone business.

.02 Under § 1397B(b)(1)(A), a QEZ asset means any property that would be a qualified community asset (as defined in § 1400F) if in § 1400F: (1) references to empowerment zones were substituted for references to renewal communities; (2) references to enterprise zone businesses (as defined in § 1397C) were substituted for references to renewal community businesses; and (3) the date of the enactment of § 1397B (December 21, 2000) were substituted for December 31, 2001, each place it appears. However, under § 1397B (b)(1)(B), the District of Columbia Enterprise Zone is not treated as an empowerment zone for purposes of § 1397B.