December 12, 2019

Form 1099-B Expands Reporting Requirements to Qualified Opportunity Funds

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first_imgQOFs Can Shelter Capital Gains Theinformation previously provided on line 3 in prior versions of Form 1099-B isnow entered on line 12. Reporting by QOFs Inthe past, only brokers and barter exchanges had to file a Form 1099-B. However,this responsibility now also falls on a QOF if the QOF interest is not soldthrough a broker–for example, if the QOF is not publicly traded. thenumber of shares or units of stock, or the percentage of a partnership interest(line 1a);thedate the taxpayer invested in the QOF, if known (line 1b);thedate the taxpayer disposes of the QOF interest (line 1c);thegross cash proceeds from all dispositions of the QOF investment, if known (line1d);checkthe QOF box on line 3 Form 1099-B Due Dates By Ray G. Suelzer, J.D., LL.M. Investorswho dispose of a QOF interest will use the information from Form 1099-B toreport gain or loss on their own Form 8949, Sales and Other Dispositions ofCapital Assets. The investor also files a Form 8949 in the tax year theinvestment in the QOF is made to report the amount of deferred gain. QOF Investor Reporting on Form 8949 However,reporting requirements are streamlined for a QOF. A QOF that is not a brokeronly needs to provide the following information on Form 1099-B: Abroker (including a QOF that is also a broker) reports the disposition of a QOFinterest just like any other disposition of stock or a partnership interest. Thus,the broker must report the basis (cost) of QOF stock on line 1e. Ataxpayer who invests capital gains in a QOF generally is not taxed on thosegains until the QOF interest is sold or, if earlier, December 31, 2026. Inaddition, appreciation in a QOF investment is not taxed at all if the taxpayerowns the QOF interest for at least ten years. Eachdisposition of a QOF interest is reported on a separate Form 1099-B regardlessof how many dispositions any one person makes in the calendar year. A dispositionincludes any disposition of the investment, even if it does not involveconsideration. For instance, dispositions by gift or inheritance must bereported. Additional QOF Reporting Rules QOFswere created at the end of 2017. A QOF must be organized as a partnership orcorporation. QOFs are intended to spur development in economicallydisadvantaged areas. Thedue dates for filing Form 1099-B with the IRS and providing a copy to theinvestor are the same as for other types of transactions reported on Form1099-B. Thus, paper versions of Form 1099-B for calendar year 2019transactions must be filed with the IRS by February 28, 2020. The deadline isextended to March 31, 2020, for forms filed electronically. Form 1096, atransmittal statement, must accompany all paper submissions. Filers preparing250 or more Form 1099s generally must file electronically. The filer must also provide a copy of the Form1099-B to the taxpayer by February 18, 2020. For additional information on qualified opportunity funds and informationreporting requirements, see the CCH Answer Connect Topic Pages entitled QualifiedOpportunity Funds and Recognitionof Capital Gain Invested in Qualified Opportunity Funds. Thedraft version of Form 1099-B only required brokers and QOFs to file Form 1099-Bfor each person who received cash, stock, or other property in exchange for aQOF interest. The final version of Form 1099-B fills in missing details for QOFreporting. Alldispositions of QOF investments are reported regardless of the identity of theperson who disposed of it. For example, if the QOF investor is a corporation,Form 1099-B is still required. For2019, many operators of qualified opportunity funds (QOFs) will have to reportthe disposition of an investor’s interest in a QOF on Form 1099-B, Proceedsfrom Broker and Exchange Transactions. The QOF itself will have to report anydisposition that is not reported by a broker. Login to read more on CCHAnswerConnect. Not a subscriber? Sign up for a free trial or contact us for a representative.last_img