Updated October 16, 2026. Quick answer: Form 8997 is the annual statement of qualified opportunity fund (QOF) investments. The instructions say an eligible taxpayer holding a QOF investment at any point during the year must file it with a timely filed federal income tax return, including extensions. Parts I to IV report holdings at the start of the year, gains deferred this year, inclusion events, and holdings at year end. It is attached to the return, not filed alone, and each deferred gain goes in a short-term or long-term column.
Related reading on this site: IRS Publication 544.
What Form 8997 is and who attaches it
The form’s full title is “Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments”. It is not filed on its own. The header says “Attach to Form 1040, 1040-SR, 1040-NR, 1041, 1065, 1120, 1120-F, 1120-REIT, 1120-RIC, 1120-S, or 990-T.”
The instructions explain why the form exists. The statute behind it “added section 1400Z-1 to provide for the designation of certain census tracts as qualified opportunity zones (QOZs)” and then provided benefits for investing through a fund: “Taxpayers that invest in QOZ property through a QOF can defer the recognition of certain gains.” The form itself has a narrower job: “An investor in a QOF uses Form 8997 to inform the IRS of the QOF investments and deferred gains held at the beginning and end of the current tax year, as well as any capital gains deferred by investing in a QOF and QOF investments disposed of during the current tax year.”
On who files, the text is direct: “An eligible taxpayer holding a QOF investment at any point during the tax year must file Form 8997 with the taxpayer’s timely filed federal income tax return (including extensions).” It defines the term in the next sentence: “An eligible taxpayer is a person that is required to report the recognition of gains during the tax year under federal income tax accounting principles.”
Two cases are spelled out. For someone with no return requirement, “If you are not otherwise required to file a return, with the exception of grantor trusts, but you held a QOF investment at any point during the tax year, attach Form 8997 to an appropriate return with your name, address, and taxpayer identification number.” For a corporate group, “A consolidated group should include with the group’s return a separate Form 8997 for each group member that held a QOF investment during the tax year.”
Key terms: QOF, QOF investment and the 180 day window
The instructions define the fund: “A QOF is an investment vehicle organized as a corporation or a partnership for the purpose of investing in QOZ property (other than another QOF) that holds at least 90% of its assets in QOZ property.”
A QOF investment is a narrower thing than any purchase in a fund: “A QOF investment is an investment of eligible gain into a QOF to defer recognition of the eligible gain.”
Timing is part of the definition: “Generally, the investment in the QOF must have occurred within the 180-day period beginning on the date the gain would be recognized for federal income tax purposes if the eligible taxpayer didn’t elect to defer recognition of that gain.” The form ties into the capital gain reporting forms: “A QOF investment is also reported on Form 8949; other nonqualifying investments in the entity certified as a QOF are not reported on Form 8997.”
Parts I to IV and the column grid
The form has four parts, which follow one investor’s year from opening position to closing position. In the instructions’ words:
| Part | What the instructions say it is for |
|---|---|
| Part I | “Complete Part I to declare your QOF investments held at the beginning of the current tax year”; for individuals this is generally January 1, 2025, per the instructions |
| Part II | “Complete Part II to report your capital gains for the current tax year that were deferred by investing in a QOF.” |
| Part III | “Complete Part III to report inclusion events during the current tax year for your QOF interests.” |
| Part IV | “Complete Part IV to report your deferred gain held during the tax year that was not invested and your QOF investments held due to current-year capital gain deferrals and prior tax year(s) deferrals”; for individuals this is generally December 31, 2025 |
Part I carries a reconciliation note on the form: “If different from last year’s ending QOF investment holdings, attach explanation.” Each part uses the same grid of columns, from (a) EIN to (f) long-term amount.
The short-term and long-term split is not optional. The instructions say “When reporting the amount of the deferred gain, use the appropriate column (either (e) or (f)) depending on whether the remaining deferred capital gain in the fund was a short-term or a long-term capital gain.” Parts II to IV repeat the same rule.
Space is handled with continuation sheets: “Attach and label a separate continuation sheet if the number of QOF investments to be reported in Part I, II, III, or IV exceeds the amount of lines provided.”
Special gain codes and noninclusion transfers
Column (d) takes a code when the investment grew out of a particular kind of gain. The instructions say a special gain code “is a code that is entered when the QOF investment originated from an elected deferred gain, where the gain was:”
| Code | Gain origination as printed |
|---|---|
| A | “Section 1256 gain” |
| B | “Form 4797 (section 1231)” |
| C | “Straddle(s)” |
| D | “Collectibles” |
| E | “Exempt by treaty (but for election to defer rather than claim exemption)” |
| F | “Deferred gain relating to a noninclusion transfer” |
| G | “Adjustment to basis 5-year” |
| H | “Adjustment to basis 7-year” |
Code F has its own identification rule on each part. For an investment acquired from another taxpayer, the instructions say to “provide the following information relating to the transferor of the QOF investment.” They then say “Enter in column (c) the taxpayer name, the TIN, and the date the QOF investment was transferred to you.” The special gain code F then goes in column (d). The mirror rule applies to a transfer out: “provide the following information relating to the transferee of the QOF investment.”
Inclusion events, the 5 and 7 year basis wording, and the treaty waiver
Part III is where deferral ends. The instructions define the trigger: “An inclusion event occurs if you sold or transferred your QOF investment, if you received a distribution from the QOF, if you declared your QOF interest worthless, if the QOF ceased to be a QOF, or if you or the QOF engaged in certain other transactions.” “Some transactions are excepted from being inclusion events.”
A checkbox protects the reporting trail: “Check the box in Part III if you disposed of a QOF investment during the current tax year and didn’t receive a Form 1099-B from the QOF or other third party reporting the disposition.”
The basis language appears twice. In the reminder section: “If you held your investment in the QOF for at least 5 years, you may be eligible for a basis adjustment increase of 10% of the deferred gain (the amount of your investment).” In What’s New for this edition: “If you held your investment in the qualified opportunity fund (QOF) for at least 7 years, you may be eligible for a basis adjustment increase of an additional 5% (for a total of 15%) of the deferred gain (the amount of your investment).” The following arithmetic is an illustration with a made-up amount, not an IRS example, applying those two printed percentages:
| Item | Amount | Note |
|---|---|---|
| Deferred gain (illustration input) | $100,000 | Made-up amount, not an IRS example |
| 5-year increase of 10% | $10,000 | Computed here: $100,000 times 10% |
| 7-year total of 15% | $15,000 | Computed here: $100,000 times 15% |
Reporting such an adjustment applies to an inclusion event in Part III, for each QOF investment being disposed of that individually meets the 5-year or 7-year holding period requirement. Column (c) takes the wording Adjustment to basis 5-year or Adjustment to basis 7-year, and column (d) takes special gain code G for 5-year or H for 7-year. For calculation detail the instructions send the reader elsewhere: “See Regulations section 1.1400Z2(b)-1(g) for further guidance on calculating the basis”.
A separate yes or no block on page 1 covers foreign taxpayers. The instructions say “A foreign eligible taxpayer includes, for example, any individual who is required to file Form 1040-NR, a foreign corporation, and a foreign estate or trust.” On the form, a foreign eligible taxpayer is told that the election to defer depends on the answer to the waiver question that follows.
Which revision applies, and where the rest of the planning sits
The Instructions for Form 8949 list, among the items that individuals report on that form, “The election to defer capital gain invested in a qualified opportunity fund (QOF).” The sale side is on the Form 8949 page.
The edition read for this page is Form 8997 for 2025, which includes its instructions in the same file and is the revision irs.gov served when it was read on 2026-10-16. Check the revision printed on the form you are filing, because a later year can change the part layout, the holding period language and the codes.
Form 8997 reports positions; it does not decide whether a deferral fits a given sale. For how capital gains are taxed before any deferral, see capital gains tax by state. For the year a large gain lands in the brackets, see the 2026 tax brackets page. Another deferral route is compared with paying the tax on the exchange fund page, and the net investment income form is on the Form 8960 page.
Common mistakes
- Treating any purchase of fund interests as a reportable QOF investment. The instructions limit the term to an investment of eligible gain, and they say other nonqualifying investments in the entity are not reported on Form 8997.
- Leaving off the form in a year with no new investment. The instructions require filing when a QOF investment is held at any point during the tax year, so holdings from earlier years still produce a Part I and Part IV report.
- Reporting a gain in the wrong column. The instructions require column (e) or (f) depending on whether the deferred capital gain was short-term or long-term, and the Part III disposal needs the 1099-B checkbox when no Form 1099-B arrived.
Related: capital gains tax by state, 2026 tax brackets, exchange fund versus selling and paying the tax, and Form 8960.
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Answer againSources
- Form 8997 (2025) with instructions, Initial and Annual Statement of Qualified Opportunity Fund (QOF) Investments: https://www.irs.gov/pub/irs-pdf/f8997.pdf
- 2025 Instructions for Form 8949: https://www.irs.gov/pub/irs-pdf/i8949.pdf
Read from the IRS documents linked above on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.