Filing a 1040X to include K-1

[freddytax]

I may have already posted this question so apologies if I did.

I've already filed my 1040 but I may have a  capital loss from the sale of a home that was in a Trust.  If I do indeed need to file the K-1 in the 1040X what is the simplest way to accomplish this?

Also, it's my understanding that adding the K-1 will automatically populate (in this case a loss) schedule D and I'm limited to $3,000/year to have capital losses offset capital gains.

Finally, I read that the K-1 can only be filed once the Trust is closed.  Is this true?

Thank you for the help!

[MelindaS1]

Wait until your federal and state returns are accepted by the authorities before considering an amendment. If you receive a Schedule K-1 in your name with taxable income for any tax year, that must be reported on your individual tax return regardless of the status of the trust. If you receive a K-1 for tax year 2025, that income must be added to your tax return that was already filed. 

Whether the Trust issues a distribution of taxable income to you or is issuing its final distribution of taxable income in the closing year will depend on the status of the trust and its tax character; different rules can apply, for example, if the trust is a grantor trust, Subchapter S trust, or some other type. Is there more information you can provide about the trust type and its activities for the year?

Any excess capital losses reported to you above your $3,000/year limited will be carried forward to future tax years; until you report the capital loss carryforward, you will not be able to claim it against future gains. Instructions for filing an amended 1040-X:

What should I know before amending my return?

Here are some things to know before you begin:

• Make sure you really need to amend.
• Wait until your return has been accepted (or mailed if paper-filing).
• Use the same TurboTax account you used to file your original return.
• Once you begin your amendment, you'll see your original return. Only make changes to the areas of your return that need amending. The refund calculator will start new at $0 and only reflect the changes in the refund or tax due.
• Any changes you make to amend your federal return will automatically be transferred over to your state return.

TurboTax Help - How do I amend my federal tax return for this year?

IRS - Instructions for Schedule K-1 (Form 1041) for a Beneficiary Filing Form 1040

[freddytax]

Thank you, Melinda, I believe I agree with you about filing a 1040X.  For the home trust their is no capital gain but rather a capital loss (for commissions, expenses, etc. = ~$50,000) since the house was sold for the FMV = $700,000, sales price = $700,000.

Both my wife and I are retired and we only made ~$100,000 in 2025 in IRA RMD, interest, dividends and my wife's SSA.  The only taxes we paid during the year were $300 on the IRA RMD.  TT said we owed no taxes and actually had a $222 refund.  So I don't know if it's worth the trouble to file a 1040X since the capital loss wouldn't do us much good.  It would nearly zero out qualified dividends.  Does that sound right to you?

[freddytax]

Some more context.  I live in NV so I do not pay state income tax.  The Trust is irrevocable, I am the trustee, my sister and I the heirs, the home was the only asset and I've distributed proceeds to both myself and my sister.

Again, FMV that my tax accountant is using for the home is $700,000 and the home sold for $700,000.  The trust is still open so no K1 has been generated (do I need to consult my lawyer?).

Thank you!!

[freddytax]

Also, my return was accepted by the IRS.

Thank you

[MelindaS1]

While qualified dividends are taxed at the long-term capital gains tax rates, capital losses are not used to directly offset qualified dividends, with the exception of the $3,000 all ordinary income allowance (which does include the dividends). You would need to report any capital loss carryover amount on Schedule D to use it in a current or future tax year to offset $3,000 in taxable income or additional capital gains. If you haven't reported the carryover loss, then you essentially would be forfeiting the benefit. 

There is an outstanding question of gain/loss on the sale of the home, because the basis in the property to the trust would be its adjusted cost basis and not the FMV at the time of sale. Proceeds - basis = gain/(loss).

[freddytax]

Thanks, Melinda!  I left out an important detail about the home FMV.  This was determined by time of death of my father, hence $700,000.

If I already don't owe anything and the refund is so small based on the taxes I paid in 2025 ($300) could I simply roll over the capital loss to next year?  What I'm trying to do is avoid filing the 1040X but I guess that wouldn't be too much trouble to add the $3,000 to schedule D.  Is that a simple process?

[DianeW777]

No. It's important to file the amended return because you want to show your carryover to future years. And based on your information, the carryover may include some of the $3,000 you are allowed in 2025, if the income is too low to use it. This overall loss can be carried forward until it is used up. This means a lot of tax savings going forward. It won't be a lot of trouble.

• What is a capital loss carryover?

@MelindaS1 is a tax expert and has provided the details for you to amend.

@freddytax 

[freddytax]

Thanks, Diane!  Do I simply go into the tool and add the info to K-1, save and then select 1040X and file?  So upon my Trust accountant filing tax information for the Trust does a K-1 get generated that will then be sent to me?

[freddytax]

Maybe the 2025 1040X functionality is not yet available?  I can't for the life of me find where to do it.  I file an amended return last year so I know it's possible!

[freddytax]

And yes, I did e-file last year and this year.

[freddytax]

My wife will also have a K-1 for her parent's trust.  Does a second 1041 get generated or do both her and my information generate a single 1041?

[MelindaS1]

Whether a K-1 is generated out of the trust 1041 will depend on the type of trust and activity for the year (such as distributions to beneficiaries), you'll have to email/call the trust accountant about your specifics. If you are set to receive a K-1 from the trust, they will send it to you, and you would need to report it. 

You don't have to worry about Form 1041, that is reported at the trust level and the K-1 is sent out of that level down to you (and your wife) at the recipient/beneficiary level for tax reporting (if it is a K-1 year). 

These are the instructions for selecting an amended return in TurboTax Online or TurboTax Desktop, but I recommend waiting until you know for sure what the trust is going to send to you this year from its tax reporting. 

[freddytax]

Thanks, Melinda!!