How do I input a Qualified Opportunity Zone Fund Deferral in a 1040 return using worksheet view?

  • Article Type:
  • How To
  • Last Modified:
  • 07/10/2020

Objectives

How do I input a Qualified Opportunity Zone Fund Deferral in a 1040 return using worksheet view?

Environment

CCH Axcess™
CCH Axcess™ Tax
CCH® ProSystem fx® Tax
 

Procedure

Question: I deferred a capital gain and invested it in a QOF. How do I enter that to flow to Form 8949?

Answer:
  1. Enter the gain like you normally would have to flow to Schedule D, 4684, 4797, 6252, 6781, 8824, or 8949.
  2. Make a separate entry for the deferral on Gains and Losses > Capital Gains and Losses.
  3. Enter a Description of the QOF, Date Acquired (current tax year date), Federal ID Number of the QOF.
  4. Enter Term Code of "S" if the deferral is short-term or "L" if the deferral is long-term.
  5. Make a negative Adjustment - Override entry for the amount of the deferral.
  6. Enter Form 8949 Code "Z".
  7. Do not tie the deferral to another gain or entity.
  8. The deferred gain will proforma every year until it's sold or needs to be recognized.
Note: This entry will flow to Form 8949 with Box C or F marked based on Term Code. It will also flow to Form 8997, Part II and Part IV.

 
Question: I deferred a Section 1231 gain on Form 4797 and invested it in a QOF. How do I enter that to flow to Form 4797?

Answer:
  1. Enter the gain on Gains and Losses > Business Property, Casualties, and Thefts.
  2. Enter a Description of the QOF, Date Acquired (current tax year date), Federal ID Number of the QOF.
  3. Enter Property Code "1231".
  4. Check "Postpone Gain in QOF".
  5. The deferred gain will proforma every year until it's sold or needs to be recognized.
  6. Note: If a gain is calculated, then an offsetting entry will flow to Form 4797, Part I to offset the gain. If a loss is calculated or a negative Section 1231 Gain - Override is entered then we assume that they are offsetting a 1231 gain themselves.
Note: This entry will fro to Form 4797, Part I; Form 8949 with Box F marked; and Form 8997, Part II and Part IV.
 

Question:  I deferred a Section 1231 gain on Form 6252, Form 8824, or I wish to offset some other 1231 gain such as from a pass-through myself.  How do I enter that to flow to Form 4797?

Answer:
  1. Enter the gain like you normally would have to flow to 4797, 6252, 8824.
  2. Enter a Description of the QOF, Date Acquired (current tax year date), Federal ID Number of the QOF.
  3. Enter Property Code "1231".
  4. Check "Postpone Gain in QOF".
  5. Enter a negative "Section 1231 Gain - Override" for he amount of the deferral.
Note: This entry will fro to Form 4797, Part I; Form 8949 with Box F marked; and Form 8997, Part II and Part IV.
 

Question: I deferred a gain previously by investing in a QOF but haven't sold it yet. How do I get this to flow to Form 8997.

Answer:
  1. If it was a Section 1231 deferral, make the entry on Gains and Losses > Business Property, Casualties, and Thefts. Otherwise, make the entry on Gains and Losses > Capital Gains and Losses.
  2. Enter a Description of the QOF, Date Acquired of the QOF, Federal ID Number of the QOF.
  3. Enter "QOF Deferred Gain" for the amount of the gain that was deferred. Note: Section 1231 only have one input amount because the deferral is always considered long-term.
  4. As long as the date sold, sales price, cost or other basis, and and gain/loss overrides are left blank then the entry will only flow for Form 8997, Part I and Part IV. It will not flow to Form 4797 or Form 8949 to be recognized as a gain in the current tax year.
  5. The deferred gain will proforma every year until it's sold or needs to be recognized.

Question: I deferred a gain previously by investing in a QOF and now I want to recognize the gain.

Answer:
  1. If it was a Section 1231 deferral, make the entry on Gains and Losses > Business Property, Casualties, and Thefts. Otherwise, make the entry on Gains and Losses > Capital Gains and Losses.
  2. Enter a Description of the QOF, Date Acquired of the QOF, Federal ID Number of the QOF.
  3. Enter "QOF Deferred Gain" for the amount of the gain that was deferred. Note: Section 1231 only have one input amount because the deferral is always considered long-term.
  4. Enter a Date Sold.
  5. Enter the Sales Price and Cost or Other Basis that was in excess of the deferred gain. Note: The cost should not include any deferred gain because we'll automatically include that based on "QOF Deferred Gain" input. Only include any additional amounts invested in the QOF in excess of the deferred gain in Cost or Other Basis input.
Note: This entry will flow to Form 4797 or Form 8949 as well as Form 8997, Part I and Part III.
 
Question: I deferred a gain previously by investing in a QOF and now I want to recognize the gain. However, I sold the QOF in an installment sale.

Answer:
  1. Enter on the Installment Sales worksheet.
  2. Enter a Property Description of the QOF, Date Acquired of the QOF, Federal ID Number of the QOF.
  3. Enter a Property Code. Note: Generally they will want to use STCAP or LTCAP. If the deferral was for Section 1231 they will typically want to make an entry to recognize that deferral on Gains and Losses > Business Property, Casualties, and Thefts instead because any gain in excess of the deferred gain they will usually want to be a capital gain.
  4. On Installment Sales > Sales Price and Cost. Enter the amount of the short-term or long-term QOF Deferred Gain.
  5. On Installment Sales > Sales Price and Cost. Enter the Sales Price and Cost or Other Basis that was in excess of the deferred gain. Note: The cost should not include any deferred gain because we'll automatically include that based on "QOF Deferred Gain" input. Only include any additional amounts invested in the QOF in excess of the deferred gain in Cost or Other Basis input.
  6. The full amount of the deferred gain will be recognized in the current tax year. Only the amounts received above and beyond that deferred gain can be spread out over the installment.
Note:  This entry will flow to Form 4797 or Form 8949 as well as Form 8997, Part I and Part III.

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