TurboTax generated a line item expense in my Schedule C labeled "Section 465(d) CarryOver". What is this and how was it generated?

Section 465(d) carryover refers to a loss that was limited in a prior year due to the "at risk" rules. At risk is a test that the IRS uses to see if you can deduct losses from investments and businesses that you own.

 

The basic rule is that you can't deduct a loss from your investment or business if the loss doesn't actually cause you to lose money.

 

Money you've invested in your business that is not at risk includes:

•  Nonrecourse loans; that is, financing for which you're not personally liable.
•  Cash, property, or borrowed amounts protected against loss by a guarantee, a stop-loss agreement, or a similar agreement.
•  Money borrowed from a person who has an interest in the business, other than as a creditor.

 

If you think you may have reported that you are not at risk in error, this is how to change it:

1. Open and continue your return.
2. Click on the word Federal from the menu.
3. Click on Income & Expenses.
4. Find Self-Employment Income & Expenses on the list.
5. Click Review on the right.
6. Click Review to the right of your business name.
7. Find Uncommon Situations near the bottom of the list.
8. Click Edit to right.
9. Carefully review your answers to these questions.

If you are using TurboTax Desktop, installed on your computer, you can look at Schedule C in Forms mode, by clicking on the Forms icon in the upper right corner. Look at line 32b of Schedule C to see if this box is checked.