New Draft Form 8997, designed for 12/31/26

What QOF managers and their CPAs should be assembling now, before the instructions arrive.

The IRS quietly published an early-release draft of the 2026 Form 8997 on August 4, 2026. The instructions have not been released, and draft forms may not be filed. The structure is worth reading now. Much of what changed is built around the end of the deferral period on December 31, 2026, which reaches every investor who put a gain into a QOF before 2027.

Part III now carries the computation. The 2025 form asked only for the amount of previously deferred gain included in income. The 2026 draft splits Part III in two and asks for the figures behind that amount.

Section A reports inclusion events during the year. Sales, distributions, gifts, and transfers before year end go here. Two columns are added: the deferred gain held in the QOF, and the fair market value of the interest.

Section B reports the end of the deferral period. Every pre-2027 investor files an entry here, whether or not anything was sold. Column (d) is the remaining deferred gain, column (e) is fair market value, and column (g) is the 5-year or 7-year basis adjustment, flagged with special gain code G or H. Line 5 adds Sections A and B together and carries the total to Form 8949.

Draft Form 8997 (2026), page 3. Highlights added. Columns (d), (e), and (g) do not appear on the 2025 form. Read the full draft: irs.gov/pub/irs-dft/f8997--dft.pdf

The instructions still have to settle three things: the fair market value method for column (e), the event codes in the new Part V, and how Sections A and B fit together for an interest partly disposed of earlier in 2026. We will send an update when they post.

Part IV is reserved. Part V is new.

Part IV has been emptied. Every column reads "Reserved for future use." No pre-2027 deferral is still running at year end, so nothing is left to carry forward. The part is parked, not deleted, pointing to a return for 2027 under OZ 2.0.

Part V tracks basis after the deferral ends. It lists each QOF interest an investor still holds, the basis in that interest after the inclusion, and an event code. This record supports the 10-year exclusion and stays on the return until the interest is sold.

Draft Form 8997 (2026), page 4. Highlights added.

What to have ready for every investor

Each item feeds a line of the form and is tracked by tranche, not by investor.

• QOF EIN, acquisition date, and description. Dates drive both holding-period tests.

• Remaining deferred gain. Net of prior inclusion events, split short and long-term.

• Fair market value at 12/31/26. One method, documented, applied fund-wide.

• Holding-period status. The 5-year and 7-year tests, met or not, as of 12/31/26.

• Inclusion events earlier in 2026. Sales, distributions, gifts, and transfers, valued.

• Gain recognized. The lesser of remaining deferred gain or value less basis.

• Basis after inclusion. Basis plus step-up plus gain recognized, carried until exit.

• Form 1099-B status. Flag any disposition where no 1099-B was issued.

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OZXpro is the most sophisticated platform for Opportunity Zone data, records, and compliance. The architecture is modern, flexible, and secure, and it turns compliance from a filing exercise into an internal control. Every field this draft asks for is already tracked at the investor and tranche level, so Section B and Part V schedules will be ready for your investors the day the IRS finalizes the form.

This briefing summarizes an IRS early-release draft and is provided for informational purposes only. Draft forms may not be filed and are subject to change before final release. Nothing here is legal, tax, or investment advice, and you should verify all references against current IRS guidance and consult counsel before acting.

Source: IRS, Draft Form 8997 (2026), posted 8/4/26. Prepared by OZXpro.