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How to Report Deferred Gain Going into Qualified Opportunity Zone from Gain on 4797

Eric
Level 1

We had a client sell some real estate at a gain, then they invested a portion of the gain into a Qualified Opportunity Zone Fund.  The gain is reported on page 2 of the 4797, then flows to page 1 of the 4797, then goes to Sch D.  I cannot figure out how to report the deferred gain on the forms.  The only place I see is on Form 8949 with code Z.  But the 4797 does not go to Form 8949.  But the instructions to 4797 say to use 8949 to report the deferred gain.  But then the instructions for 8949 say that 4797 gains go directly to Sch D.  For now, we've added another line item on page 1 of the 4797 showing a loss for the amount of the deferred gain that was invested, as an offset to the real estate gain.  I would imagine there would be a more formal way of reporting this, especially since the deferred gain needs to be tracked for many years in order to determine the reduction in future years.  Any help would be appreciated.  Thanks.

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IntuitCharlene
Community Manager
Community Manager

It looks like the article is no longer available but I was able to recover the steps. 

Program Details

You'll need to enter a rollover to a QO Fund as two separate dispositions in Lacerte. Per the Form 8949 instructions, you should report the original transaction as if the tax on the eligible gain is not going to be deferred. Then you should enter a separate transaction to report the amount of eligible gains on which tax will be deferred by investing in a QO Fund.

Follow these steps to report the original transaction:

  1. Go to Screen 17.1, Dispositions (Schedule D, 4797, etc.).
  2. Fill out the following fields, if applicable;
    • Description of property
    • Date acquired (negative date =various)
    • Date sold (negative date=various)
    • Taxpayer, Spouse, Joint
  3. Scroll down to the Schedule D section to complete the following fields;
    • Sales price
    • Cost or other basis (do not reduce by depreciation)

Do not make any adjustments to this transaction. Leave the Qualified Opportunity Fund subsection completely blank. Enter this transaction as if it's a general disposition.

Follow these steps to report the Qualified Opportunity Fund Transaction:

  1. While still on Screen 17.1, Dispositions (Schedule D, 4797, etc.).
  2. In the left navigation panel, within the Disposition section, click Add.
  3. Enter a Description of property.
  4. Enter the Date acquired.
  5. Scroll down to the Schedule D section.
  6. Enter a '2' in the field Reported on: blank = Form 1099-B with basis reported to IRS, 1=Form 1099-B but basis not reported to IRS, 2=form other than Form 1099-B (Form 8949).
  7. While still within the Schedule D section, scroll down to the Qualified Opportunity Fund subsection.
  8. Check the box Rollover to Qualified Opportunity Fund.
  9. Enter a '1' or 2 in 1=short-term, 2=long-term.
  10. Enter the Deferred gain. This should be the amount of gain for which tax will be deferred.
  11. Enter the fund's tax identification number in TIN of QO Fund.

The program will report the deferred gain as a negative amount on its own row of Form 8949 along with the QO Fund's information.

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IntuitCharlene
Community Manager
Community Manager

To enter the Deferred Gain it actually requires two transactions to be entered. This article gives you details for Lacerte on how to enter those to get it to work out correctly: 

 

https://accountants-community.intuit.com/articles/1801290-rollover-to-qualified-opportunity-fund 

 

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Eric
Level 1

That'll work.  Thanks!  As a side note, the people I talked to at Lacerte customer support had never even heard of the Qualified Opportunity Zones.  This information needs to be spread to the phone support people.  Thanks for your help.

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IntuitCharlene
Community Manager
Community Manager

I'm glad to help! I'll make sure our phone teams are aware of this. 

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jeffarians
Level 2

Good afternoon,

I am trying to find the solution to this question as well, but when I click on the link, it doesn't take me to any solution. Did the solution move somewhere else?

 

Thank you!

IntuitCharlene
Community Manager
Community Manager

It looks like the article is no longer available but I was able to recover the steps. 

Program Details

You'll need to enter a rollover to a QO Fund as two separate dispositions in Lacerte. Per the Form 8949 instructions, you should report the original transaction as if the tax on the eligible gain is not going to be deferred. Then you should enter a separate transaction to report the amount of eligible gains on which tax will be deferred by investing in a QO Fund.

Follow these steps to report the original transaction:

  1. Go to Screen 17.1, Dispositions (Schedule D, 4797, etc.).
  2. Fill out the following fields, if applicable;
    • Description of property
    • Date acquired (negative date =various)
    • Date sold (negative date=various)
    • Taxpayer, Spouse, Joint
  3. Scroll down to the Schedule D section to complete the following fields;
    • Sales price
    • Cost or other basis (do not reduce by depreciation)

Do not make any adjustments to this transaction. Leave the Qualified Opportunity Fund subsection completely blank. Enter this transaction as if it's a general disposition.

Follow these steps to report the Qualified Opportunity Fund Transaction:

  1. While still on Screen 17.1, Dispositions (Schedule D, 4797, etc.).
  2. In the left navigation panel, within the Disposition section, click Add.
  3. Enter a Description of property.
  4. Enter the Date acquired.
  5. Scroll down to the Schedule D section.
  6. Enter a '2' in the field Reported on: blank = Form 1099-B with basis reported to IRS, 1=Form 1099-B but basis not reported to IRS, 2=form other than Form 1099-B (Form 8949).
  7. While still within the Schedule D section, scroll down to the Qualified Opportunity Fund subsection.
  8. Check the box Rollover to Qualified Opportunity Fund.
  9. Enter a '1' or 2 in 1=short-term, 2=long-term.
  10. Enter the Deferred gain. This should be the amount of gain for which tax will be deferred.
  11. Enter the fund's tax identification number in TIN of QO Fund.

The program will report the deferred gain as a negative amount on its own row of Form 8949 along with the QO Fund's information.

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**Mark the post that answers your question by clicking on "Accept as solution"

View solution in original post

PaulB
Level 1

Thank you Charlene.  This worked great for the federal return but generated a Critical Diagnostic Warning error 17304 "WI requires a Date Sold in Dispositions on Schedule WD to electronically file this return".  Any ideas how to overcome this?  Thanks.

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MichaelT
Level 2

If the gains to be deferred are passed through from a K-1 such as would normally appear on schedule D lines 5 and 12, would you instead enter these gains on Form 8949?

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Ember123
Level 3

Good luck. If you get an answer I would love to know.

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stephanie
Level 2

None of the links with the answers work.