A Schedule K-1 must be reported on the individual's tax return for the year that includes the end date of the partnership's tax year. If the Schedule K-1 shows a tax-year end date in 2023, it goes on the individual's 2023 tax return.
Presumably this is a Schedule K-1 (Form 1065) from a partnership [Edit: or a Schedule K-1 (Form 1041) from a trust]. A capital loss carryover is applied first to capital gains, then what remains up to $3,000 can be applied to ordinary income. Anything that remains of the capital loss after that carries forward to the next tax year.
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