Qualified Opportunity Funds and Deferred Capital Gains

[Curious One]

I'm interested to learn more about the benefits of reinvesting capital gains into a QOF, as well as the timeframe to reinvestment into a QOF from gains having been realized - must it all be done in the same year, or is there something comparable to 1031 timing?  Also, what info from my K-1s will allow me to determine with precision the extent of my capital gain, as opposed to other distributions received from the investment. Thanks.  

[tagteam · Accepted solution]

You can start with the following IRS web sites (links below).

https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions

https://www.irs.gov/newsroom/irs-issues-guidance-relating-to-deferral-of-gains-for-investments-in-a-...

PDF: https://www.irs.gov/pub/newsroom/tcja-training-opportunity-zones-qualfied-opportunity-funds.pdf

There is a list of funds at the link below.

https://www.novoco.com/resource-centers/opportunity-zone-resource-center/opportunity-funds-listing

[jmsandlin]

I have made an investment in a QOF using capital gains from sale of appreciated stock. How do I enter the deferral in Turbo Tax Premier? The software doesn't seem to account for this particular deferral as provided in the IRS Instructions for Form 8949. Are upgrades to TurboTax planned? 

[tagteam]

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@jmsandlin wrote:

Are upgrades to TurboTax planned? 

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I would hope so. The following is a link to the instructions for Form 8949.

https://www.irs.gov/instructions/i8949#idm140173103988144

Form 8997 appears to still be in draft mode.

See https://www.irs.gov/pub/irs-dft/f8997--dft.pdf

[davidmgold]

Unless TT adds this you can NOT e-file!!! A manual entry/override will prevent you from using e-file in turbotax and a paper filing is asking for an audit.

TT... speak up and tell us if you are going to include this in TT for 2019 or not!!! So frustrating that TT won't chime in definitely as to whether this is being added or not. 

[tagteam]

You actually can make manually entries in any TurboTax desktop (installed) product and still e-file. The software will generally not allow you to e-file if you make overrides. The impact of manual entries is limited to voiding the TurboTax accuracy guarantee.

Regarding the form in question, I have yet to find any consumer-level software company that has indicated whether or not they plan to include Form 8997 for the 2019 tax year. We can hope that will be the case but, at this point in time, the form is still in draft mode and we will have to wait until the IRS finalizes the form.

[martinkaj]

The 8997 form seems now, in middle February, to be finalized.

See https://www.irs.gov/pub/irs-pdf/f8997.pdf

Sadly, it might be too late for TT to incorporate it into the 2019 product.   So how do we "add it" to the TT set of pdf forms to printout and to include in a tax filing?

[tagteam]

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@martinkaj wrote:

Sadly, it might be too late for TT to incorporate it into the 2019 product.   So how do we "add it" to the TT set of pdf forms to printout and to include in a tax filing?

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You will have to download the form, prepare it manually and also incorporate it into your TurboTax filing. You will then have to print and mail your entire return.

[JumpingJAG]

It seems TaxAct has incorporated the form into its software.  https://www.taxact.com/individual-taxes/online/premier?af=0.  May have to leave TT after 15 years.  Shame.  

[kevin1313]

turbo tax any update on this?  your competitors are incorporating this form into their software....please help us long time TT loyal users as well 🙂

[tagteam]

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@kevin1313 wrote:

turbo tax any update on this?  🙂

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I would not hold out much hope for the 2019 tax year. On the other hand, I would be surprised if the form is not incorporated into the program for the 2020 tax year.