Reporting capital loss to beneficiaries on final 1041

[tmkeng]

What line on the Trust 1041 do I report a capital loss carry forward to beneficiaries in the final year of the Trust. I know where it goes on the K-1's sent to beneficiaries but where does it go on the Trust's 1041?

[M-MTax · Accepted solution]

on the final return it doesn't go anywhere on the 1041.....just gets reported on SCH D and the K-1.

[DianeW777]

The Schedule D as indicated, is the appropriate form to enter the capital loss carry forward, however on the Form 1041 you will be using the 'Distributable Net Income' section to reduce or eliminate the income from the estate income.  Then it is passed onto the beneficiaries on the K-1s.

• Distributable net income (DNI). The income distribution deduction allowable to estates and trusts for amounts paid, credited, or required to be distributed to beneficiaries is limited to DNI. This amount, which is figured on Schedule B, line 7, is also used to determine how much of an amount paid, credited, or required to be distributed to a beneficiary will be includible in his or her gross income.
• Instructions for Form 1041 2021

[tagteam]

@tmkeng 

If you are using TurboTax Business, the calculation will be made and the schedules (K-1 and Schedule D) will be populated for you automatically.

[tmkeng]

Thanks for the advice. In this case, the Trust had no income, expenses or capital gains. Therefore Schedule B, line 7 (DNI) is zero. The only entries on Schedule B would be (3000) on line 1 and 3000 on line 6, which net to show a zero DNI and, according to the Capital Loss Carry Forward worksheet, does not reduce the prior year's capital loss carry forward available to beneficiaries in this final year of the Trust.  There are no other entries in Schedule B. The only places the prior year's capital loss carry forward shows up is on Schedule D and the K1's for beneficiaries. I hope this is correct.

[tagteam]

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@tmkeng wrote:

The only places the prior year's capital loss carry forward shows up is on Schedule D and the K1's for beneficiaries. I hope this is correct.

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In the scenario you described, that would be correct.

[tmkeng]

Thanks to all who replied. Excellent help.