On 5/10/21 10:47 AM, JoeTaxpayer wrote:
> On 5/8/21 11:18 PM, "\"Retired"@
home.com wrote:
>> Never have dealt with a K1 before. Just now received one due to final
>> sale of property in my mother's estate.
>>
>> After holding onto the vacant lot for 14 years, the executor final
>> sold it. Apparently the sale generated a $12,000 loss. The K1 shows
>> the $12,000 in box 11 with code D (Long Term Loss) and $24 in Box 11
>> code B (Excess Deduction)
>>
>> What reading up I've done seems to say I can take up to $3,000 loss
>> against other Cap Gains, and carryover the remainder.
>>
>> Also looked at my favorite online Free File website FAQs, and it looks
>> like they can handle this OK next year.
>>
>> Am I understanding this correctly ? I'm not clear on what or where
>> the $24 comes in.
>
> I believe the K1 results in the same effect as a long term capital loss
> you'd incur.
>
> Unlimited offset of your year's capital gains, then $3000 against
> ordinary income.
>
> Given the software you use can handle this, just enter a mock return. I
> do this for planning all the time. It will confirm my answer, and also
> might help you with tax planning for this year, e.g. you might wish to
> take some gains, or just prefer to offset income at your marginal rate.
>
Follow up - when I'm even the slightest bit hesitant, I tend to seek a
100% accurate answer to share. I did the test return myself. Disclosure
- I've handled a K1 for over 20 years, myself, but never produced a
loss. The K1 will always reflect distributed dividends, and actual cap
gains.
In this case, I entered the $12,000 loss and confirm it did what I
initially answered, offsets gains, and if not used up (offsetting $12K
of gain) it can then offset $3000 of ordinary income. Anything more will
carry to next year. The $24 is an itemized deduction you need to
manually enter as such. The K1 form itself doesn't quite show the
details I'm sharing. It's the entry form on the tax software itself.
https://i.stack.imgur.com/Ke9Xl.jpg
vs the form itself
https://www.irs.gov/pub/irs-pdf/f1041sk1.pdf
This shows what I'm saying about the $24. If you don't itemize, just
enter it there, but ignore it, no harm, no foul.