winding up trust with loss carry forwards

[Pico Rico]

a trust has had net losses for several years, primarily due to commercial
real estate. The trust will be wound up, either distributing the real
estate and few other assets to the beneficiaries, or selling the real
estate and distributing the remaining assets of the trust. If the real
estate is sold, the loss carry forward may be reduced, but will not
disappear.

I believe the loss carry forward is allocated to the beneficiaries upon
trust termination. Is this correct?

If so, are there any limitations on each beneficiary's use of the loss carry
forward? Can it be carried back on the individual's tax return? Used
without limitation in the current year? Carried forward?

Thanks.

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[removeps-groups]

"Pico Rico" <Pico...@nonospam.com> wrote in message
news:jp1g7d$h19$1...@news.mixmin.net...

>a trust has had net losses for several years, primarily due to commercial
>real estate. The trust will be wound up, either distributing the real
>estate and few other assets to the beneficiaries, or selling the real
>estate and distributing the remaining assets of the trust. If the real
>estate is sold, the loss carry forward may be reduced, but will not
>disappear.
>
> I believe the loss carry forward is allocated to the beneficiaries upon
> trust termination. Is this correct?

Yes, on line 11D and 11E of 1041 K-1.

> If so, are there any limitations on each beneficiary's use of the loss
> carry forward? Can it be carried back on the individual's tax return?
> Used without limitation in the current year? Carried forward?

My understanding is that you report the loss as negative income on Line 21
of your 1040. I think you only need to use up as much NOL as will reduce
your taxable income to zero -- ie. income minus exemption minus itemized
deduction equals zero, but will need to look this up, because even if your
taxable income is zero you might have tax because of AMT. The rest is
carried forward. Total NOL must be used up in 20 years.

Also, you may carry back your NOL for 2 years, filing an amended return.
But if you choose to only carry forward, you must file an election to do so.

[removeps-groups]

"D. Stussy" <spam+ne...@bde-arc.ampr.org> wrote in message
news:jp4nif$5ui$1...@snarked.org...
> "removeps-groups" wrote in message news:jp37ir$4vs$1...@speranza.aioe.org...

>>> I believe the loss carry forward is allocated to the beneficiaries upon
>>> trust termination. Is this correct?

>> Yes, on line 11D and 11E of 1041 K-1.

>> My understanding is that you report the loss as negative income on Line
>> 21
>> of your 1040. I think you only need to use up as much NOL as will reduce
>> your taxable income to zero -- ie. income minus exemption minus itemized
>> deduction equals zero, but will need to look this up, because even if
>> your
>> taxable income is zero you might have tax because of AMT. The rest is
>> carried forward. Total NOL must be used up in 20 years.

> Careful: As part of the loss may have been generated by sales, such would
> be a capital loss, not an NOL. Capital losses don't carry back.

Wouldn't capital loss carryovers be reported on line 11B and 11C?