I received Schedule K-1 $25,000 NOL carryover and have entered into TTDeluxe 2017 on K-1. TT subtracts the full NOL from Income on Form 1040 line 21. Is this correct?

[mark_powell]

Note this is CD TT Deluxe 2017 software.

[Coleen3 · Accepted solution]

Yes. The NOL from a prior year is entered on the "Other Income" line . If the entire amount is used up in 2019, then you are done with it. The IRS prescribed a complicated calculation to determine if there will anything left to carry forward to next year.

[mark_powell]

TurboTaxColeen, thanks!
Further to this question,
After entering the 2017 K-1 in TurboTax, the entire amount of -$47,686 ends up in line 21 on my 1040.  It appears that the entire NOL is subtracted from
     line 7       $110,631   wages, etc.
     line 13     $33,118     long term capital gain
     line 15b   $36,000     Traditional IRA distribution, taxable as ordinary income.
     Is this correct?
     I had thought that NOL could offset capital gain and up to $3,000 of ordinary income.  I would then
     carry forward the remaining NOL to 2018.
     Thoughts?

[Coleen3]

There are two limitations on the use of capital losses. First, nonbusiness capital losses are limited to the amount of a taxpayer’s nonbusiness capital gains. Nonbusiness capital losses and gains generally relate to a taxpayer’s personal investments. Then, business capital losses are limited to the sum of (1) business capital gains and (2) the amount, if any, of the taxpayer’s nonbusiness capital gains not required to offset either nonbusiness capital losses or ordinary nonbusiness deductions. (To the extent nonbusiness capital gains exceed nonbusiness capital losses, the code says the taxpayer can use the excess to absorb additional nonbusiness deductions and business capital losses.

<a rel="nofollow" target="_blank" href="https://www.journalofaccountancy.com/issues/2001/nov/getmaximumusefromnols.html">https://www.journal...>

[mark_powell]

TurboTaxColeen, thanks again!
I scanned the article link you sent.
This is all nonbusiness.  The K-1 is final 2017 K-1 from family trust and I am one of the beneficiaries.  I upgraded to TTax Premiere, however it provides no additional insight.  TTax uses all of the 2017 K-1 in the 2017 1040 form.  The NOL exceeds the nonbusiness capital gains and appears to also be applied to the Traditional IRA disbursement, which is taxable ordinary income, I believe.  
Can the NOL also be used to offset the IRA disbursement?
Thanks!

[Coleen3]

Yes. I hope this was helpful!

[mark_powell]

TurboTaxColeen, thanks!
This is good news.  This is a complicated subject and not very clear.  Much appreciate your expert opinion.

[Coleen3]

My pleasure.

[mark_powell]

TurboTaxCollen,
Your help is much appreciated.
I have some additional questions.  The TTax K-1 step by step dialog asks if the NOL is passive loss carryovers from 2016.  Should this also be populated with the NOL as well?  When I do, it does not affect the federal refund number.
This is a final 2017 K-1 (Form 1041) from the final 2017 tax return for my parents trust (now both dead) and is a beneficiary NOL for me.  The NOL in the trust is a result of their personal home turned into a rental (moved to health care facilities) in Aug 2008 to March 2012, when property sold within the trust to support their health care.  
I believe this is a passive NOL, but do I treat it as carry over from 2016 or new for me in 2017?
Many thanks.
Mark

[Coleen3]

The sale of a rental is not passive. It is a carryover from 2016.