Thank you for the clarification. So let me make sure I have this right:
Say the Trust has $3800 in capital losses this year and $1300 in interest income. Then it also has $800 in deductions that can be applied against income.
I can use up to $3000 of the loss to offset income for this year, so that results in an income of -$1700. Then with the $800 in deductions, gives the total adjusted income of -$2500. I can distribute up to $500 of income ($1300 less $800 in deductions) to the beneficiaries.
It looks like it pays to not declare distributing any income to the beneficiaries in this case. This removes any income passed to the beneficiaries to be taxed this year, and leaves a Trust income of -$2600. If I distribute the maximum of $500, then that leaves a Trust income of -$3100. If I want to pass this excess loss to the beneficiaries when the Trust closes, do I need to somehow reduce the claimed capital loss this year and increase the carryover to next year? Logic would say to use enough of the loss to offset the income and then keep the rest for the future. However, tax laws are usually not that simple.
I take it the form specified in the program, the IRC 172(b)(3) Election to Forego the Election Carryback Period for Net OperatingLoss statement no longer exists, since the IRS no longer allows NOL carryback? Is there anything I have to fill out to indicate I want to carryover the loss to next year? I should have another $800 or so in loss available.
Thank you for the feedback.
