Entering a rollover to a Qualified Opportunity Fund (QOF) in ProSeries

Understanding Qualified Opportunity Funds (QOF)

• Starting in 2018, eligible capital gains can be invested into a Qualified Opportunity Fund (QOF) to defer the recognition of those gains for tax purposes.
• The deferred gain is typically recognized when the QOF investment is sold, exchanged, or by December 31, 2026, whichever comes first.
• The entry process generally involves two separate transactions and may require filing Form 8997. It mirrors the instructions for Form 8949.

To enter a Qualified Opportunity Fund (QOF):

Part 1: Report the Original Transaction (Disposition):

1. Open the Client Return: Open the relevant tax return in ProSeries Professional or Basic.
2. Press F6 to bring up Open Forms.
3. Type Depr Enty Wks or navigate to the Asset Entry Worksheet and select OK.
4. Scroll down to the Dispositions section.
5. Enter the Date of disposition for the property being traded.
6. Do not enter a Sales Price or any other information in this section that would generate a Form 4797.

Part 2: Report the Qualified Opportunity Fund Transaction:

1. Press F6 to bring up Open Forms.
2. Enter FBW to highlight the Form 1099-B Wks and press Enter.
3. Enter the Name of the Broker and select Create.
4. In the Quick Entry Table enter the Property Description, 8940 Box code, Date Sole, Date Acquired, Sales Price, Cost or Other Basis and if it was reported to the IRS.
5. Double click on the Property Description to access the Capital Gain and Loss Adjustment Worksheet.
6. Scroll down to Part III Specific Adjustments.
7. Check the box for Check this box if this worksheet is used to report an election to defer the tax on an eligible gain for an investment in a Qualified Opportunity Fund (QOF).
8. You'll need to enter a separate transaction on Form 8949 to report the deferred gain. This entry should result in a negative amount on Form 8949. You may need to input:
   • Description of property.
   • Date acquired.
   • An indicator for QOF rollover (refer to on-screen instructions or Form 8949 instructions).
   • Specify if the gain is short-term or long-term.
   • The exact amount of the Deferred gain.
   • The TIN of the QO Fund.

Part 3: Generate Form 8997 (if applicable):

1. Form 8997 Requirement: Most taxpayers holding Qualified Opportunity Fund investments during the year are required to file Form 8997, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments.
2. ProSeries Generation: ProSeries may not automatically generate amounts on this form from your disposition entries. You may need to manually input the required information.
3. Consult IRS Instructions: For specific guidance on completing Form 8997, including which part applies to your client, refer directly to the official IRS Form 8997 Instructions.