This must be entered on a K-1 form. The Grantor letter serves as a K-1.
- With your return open go to income
- S-corps, Partnerships, and Trusts
- Schedule K-1
- When it asks about what type of a K-1, indicate it is a trust form (1041)
- Then it will ask you for the name and EIN of the trust that issued the letter.
- Now you should see a series of Boxes, select 1 and 5.
- In box 1, list the amount
- For Box 5, represent the loss reported with a negative sign in front.
- This loss will now appear in Box 10 of Schedule D but not 12. The point is this it is reported in your return and you are being credited for the loss.
There is no deduction for administrative costs. For attorney fees, you can enter these as legal fees in the deductions and credit section of your return. These are not deductible on the federal return but they may be deductible in a state return depending on where you live.
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