Opportunity Zone Gain Deferral

[jeffarians]

I have a client who received a K-1 (from a partnership) with a gain in box 10. This flows through to the 4797 and Schedule D. The client properly reinvested this gain into an opportunity zone. How do we enter this in Lacerte? The only instructions I've found were for Form 8949.

Thank you in advance! 

[George4Tacks]

@IntuitCharlene made a post that probably contains the solution https://accountants-community.intuit.com/articles/1801290-rollover-to-qualified-opportunity-fund%C2%...

Maybe @IntuitAustin can get the link in that response repaired.

EDITED to correct broken link.  

[jeffarians]

I found this question and replied on it earlier this week, with no response.

https://proconnect.intuit.com/community/industry-discussions/discussion/how-to-report-deferred-gain-...

Hopefully someone can fix the link.

Thank you all!

[Ember123]

Why is it that any time I click on a link that looks helpful I get the message"accounting help has moved" and then I can't find the answer?

[jeffarians]

I am still waiting on this answer as well. 

[George4Tacks]

Did you look at what @IntuitCharlene  posted in https://proconnect.intuit.com/community/tax-talk/discussion/how-to-report-deferred-gain-going-into-q...

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.

[Cynchez]

If the 1231 gain is reported on a K-1, are you saying to enter it on Schedule D input screen INSTEAD of the K-1 input screen?

[George4Tacks]

If it is a deferral of a QOF, then follow the instructions in https://proconnect.intuit.com/community/individual/help/rollover-to-qualified-opportunity-fund-qof-i...

[Cynchez]

The issue I am having is related to the reporting on Form 4797.  I have entered the 1231 gain as reported by the partnership on the partnership income and loss screen.  I have also reported the QOF transaction on Schedule D input screen and screen 91 for the QOF reporting. 

I am getting a critical diagnostic advising me that I should not file the return until the software is updated to account for deferral of section 1231 gains.  And the tax calculation is definitely off because the deferral is computed at cap gains rates, not ordinary rates as it should be for the 1231 gain.  And of course Form 4797 reports the full amount of the gain - no line to report the deferral per the IRS instructions.

Are you saying that I should report this partnership K-1 section 1231 gain on the Dispositions screen 17.1 INSTEAD of the passthrough entity input screen?

[Cynchez]

Can someone please provide a response for Lacerte users?

[George4Tacks]

Yes, enter as disposition, instead of from the k-1 entry.

If you still are getting a diagnostic, then check for it by entering the number here https://proconnect.intuit.com/community/tkb/choosetemplatepage/board-id/diagnostics/search-before-po... 

If that does not solve the problem, then call support.