I Invested in the QOZ Fund This Year Within 180 Days of Capital Gains Realized on 12/10/21. How Do I Show the Gain Deferment?
To report the deferral of capital gains from investing in a Qualified Opportunity Fund (QOF) within 180 days of realizing a gain, follow these steps:
Step-by-Step Instructions for Reporting Gain Deferment
- Add a New Transaction: On the capital gains and losses screen (where you entered stock transactions), add a new transaction that was not reported on Form 1099-B or 1099-S.
- Enter Date Acquired: Input the date you invested the gain into the QOF. Leave the 'date sold' blank.
- Select Code 'Z': Under "Sales and Other Dispositions of Capital Assets," select the code 'Z' for "Gain from QOF investment deferred in current tax year."
- Enter Deferred Gain as Negative: In the "Adjustment to Gain or Losses" field, enter the deferred gain amount as a negative number (e.g., -40000).
- Check QOF Box: At the bottom of the screen, check the box indicating your investment is in a Qualified Opportunity Fund (QOF).
- Enter QOF EIN: Provide the Employer Identification Number (EIN) of the QOF.
- Save and Generate Forms: After saving, proceed to Tax Summary. Forms 8949 and 8997 will be generated automatically. Form 8949 will show a negative amount to reflect the deferred gain.
Reporting on IRS Forms
- Form 8949: Report the eligible gain on Form 8949 in the manner instructed. Do not make adjustments for deferral in column (g). If you sold or exchanged your QOF investment during the year, report the recognized gain on Form 8949, checking box C or I for short-term, or box F or L for long-term, depending on the character of the gain.
- Form 8997: If you held a qualified investment in a QOF at any time during the year, you must file Form 8997 with your return. Complete Part I for QOF investments held at the beginning of the year and Part IV for deferred gains held during the year.
- Schedule D: Report any capital gain distributions received during the year on Schedule D, line 13, as shown in box 2a of Form 1099-DIV.
Ensure you follow the instructions in Form 8949 and Form 8997 to properly report your QOF investment and deferred gain. The deferral remains in effect until you sell or exchange the QOF investment or until December 31, 2026, whichever comes first.
Source:
Schedule D Instructions
Form 8949 Instructions
Form 8997
Disclaimer: Always verify details with official Federal or State Department of Revenue Forms and Instructions.