If Form 8949, "AdjustmentsToGainOrLossCd" in ['ShortTermCapitalGainAndLossGrp' or 'LongTermCapitalGainAndLossGrp"] contains "Y" or "Z", then Form 8997 must be present in the return.
If Form 8949 includes a capital gain/loss transaction with adjustment code "Y" (gain from a QOF investment deferred in a prior year) or "Z" (election to postpone the gain from a QOF investment), Form 8997 must be in the return. Reject code F8949-024 indicates that Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments is missing.
Completing Form 8997
To access Form 8997 in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Income
- Capital Gains/Loss (Sch D)
- Other button
- Form 8997 - Qualified Opportunity Funds Investments Statement
Form 8997 has four parts that may require entries:
- Part I: Total QOF investment holdings at beginning of year. List here the QOF investments that were held at the beginning of the year, including the amount of short-term and long-term deferred gain remaining in each.
- Part II: Current tax year capital gains deferred by investing in QOF. List here this year's short-term and long-term deferred capital gains from QOF investments made during the current year.
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Part III: QOF investments disposed of during current tax year. List here the current year's "inclusion events", e.g.,
- the taxpayer sold or transferred a QOF (including between spouses in a divorce, but not including a transfer due to the taxpayer's death),
- the taxpayer received a property distribution from a QOF,
- the taxpayer declared their QOF interest worthless,
- a QOF ceased to be a QOF.
- Part IV: Total QOF investment holdings at year end due to deferrals. List here QOF investments held at the end of the year, including for each QOF the amount of short-term and long-term deferred gain.
Also, on the Schedule D - Other Menu there is a question to answer if the QOF was disposed of in that year. Select Disposed of Qualified Opportunity Fund Investment, then select Yes or No.
Note: This is a brief guide to entering Form 8997 in the TaxSlayer Pro program. This is not intended as tax advice. You are encouraged to read the IRS instructions as well as their Opportunity Zones FAQ, especially with respect to information about inclusion events.
Additional Information:
Desktop: Form 8997 - Statement of Qualified Opportunity Fund Investments