Estate form 1041 line 15a deductions exceed income, can I carry forward losses?

[jmidi]

I am the Administrator of my Uncle's estate which includes farm income (Schedule F) on the 1041.  Because of COVID this estate has been open 2 years and I am in the process of closing it out.  The Estate income for tax year 2020 is a negative amount once line 15a deductions are subtracted from the net farm income.  Is this a Net Operating Loss (NOL) that I can carry forward to 2021?   It's not clear to me that deductions from managing the estate can be carried forward, which is essentially what I'm trying to do.  I have been unable to find a specific question or info from IRS publications on this matter.   

The 2021 tax year has more farm income than deductions so I'd like to apply the "loss" the estate incurred the prior year.  As mentioned above, it's just not clear to me that estate management deductions can contribute to a NOL.

Thanks in advance!

[Anonymous_ · Accepted solution]

If this were the final year for the estate, you could pass the excess deductions through to the beneficiaries.

Otherwise, as itemized deductions, you need to calculate the estate's NOL in much the same manner as would an individual.

See https://www.irs.gov/publications/p536#en_US_2021_publink1000177330

[jmidi]

Thank you for the response!  As there is much more farm income in 2021 than deductions there will not be anything to carry over to the beneficiary on the K-1. 

I'm trying to get 2020 to carry over into 2021 so I can reduce taxable income passed through to the beneficiary on the K-1.  WRT itemized deductions that apply to Individuals: they can't deduct things like an estate can for example appraisal costs to determine estate value, travel to the estate by administrator, other not normally incurred expenses, etc, so that's why I'm asking the question.  

If an estate is allowed to deduct an expense shouldn't any loss the expense generates be able to carry forward?

[jmidi]

ok, so digging into the publication:

NOL Steps

Follow Steps 1 through 5 to figure and use your NOL.

Step 1.

 

Complete your tax return for the year. You may have an NOL if a negative amount appears in these cases.

• Individuals—You subtract your standard deduction or itemized deductions from your adjusted gross income (AGI).

• Estates and trusts—You combine taxable income, charitable deductions, income distribution deduction, and exemption amounts from your Form 1041.

So my 'taxable income' is a negative number, so I start with a NOL and then have to go through the worksheet to add stuff back in which mainly looks like items that won't apply.

It's not a whole lot of money so worst case they make me back it out and I'll cover for the beneficiary (my mom)!

Thanks again, hopefully I've got this on the right track.