fed k1 state 770

Forum|Forum|4 months ago
April 7, 2026
1 reply
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Hi,

Estate return 1041 with a NOL. the fed k1 shows no taxable income the state 770 shows the loss as the taxable income.

How is this possible?

Thanks

TurboTax Business Windows

PatriciaV

Level 15

While the Federal and State forms are linked, they operate under different sets of rules regarding what defines "taxable income" for a fiduciary.

On a Federal level, an Estate’s NOL generally does not pass through to beneficiaries until the final year of the estate.

During the Estate's Life, the loss stays at the entity level to offset the estate's own past or future income.
Since the loss isn't "distributed" to you yet, the federal K-1 reflects $0 taxable income rather than a negative number. Federal law prevents you from using the estate's operating losses to offset your personal salary or investment income until the estate is officially closed.

Virginia Form 770 starts with Virginia Taxable Income, which is typically the federal adjusted total income. However, the "Taxable Income" line on a state return represents the entity's financial position, not the beneficiary's position. If the estate lost money, the state return reflects that loss to establish a record of it.

To confirm this in your 1041 return, look at the "Final Return" box on the top of the 1041. If it isn't checked that loss is essentially "on hold" for federal purposes, even if the state return is displaying the math of the current year's deficit.

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