Support CenterCan I enter a disallowed loss on Schedule K-1 1041 return in SureFire?
No, You do not enter a disallowed loss on Schedule K-1 Form 1041, see below:
Passive losses are not allowed to be distributed to the beneficiary. It must be carried over in the trust until the final year.
If the underlying asset is sold and the PAL becomes an active loss, it can be reported on the Sch K-1 as an NOL. However, the NOL would still be trapped in the estate until the final year when it could be reported on Sch K-1, line 11d.
If the asset is distributed in kind to the beneficiary, the PAL is added to the beneficiary's basis of the underlying asset.
If deductions on 1041, lines 10 - 15a, 15c exceed income on line 9, the excess deductions are disallowed. However, in the final year of the trust the amount that exceeds the income can be reported on Sch K-1, line 11a. The same holds true for short and long term capital loss carry forwards which are reported on Sch K-1, lines 11a b.
For more information on completing Form 1041, see IRS Instructions for Form 1041 and Schedules A, B, G, J and K-1.
For more information on Passive Activity Losses, see IRS Tax Topic 425 Passive Activities - Losses and Credits.
Tags: federal,form