Form 4797 Line 12 for 2024 tax

[eleemosian]

I have the following issue with Form 4797.

I have entered a non-captured net section 1231 loss from prior year.  TurboTax asked that I enter it as a positive number.  This is then reflected in Form 4797, line 8.  Line 8 is correctly used to subtract from line 7 in line 9.  However, TurboTax appears to report it as a gain in line 9c.  This is likely due to the loss in line 8 being registered as a gain in line 12. The instruction for line 12 is: "Gain, if any, from line 7 or amount from line 8, if applicable".  Line 8, I imagine, is always a loss, and never a gain.  Accordingly, I am not sure if line 12 should be the same as line 8.

[Mike9241]

line 8 prior yr 1231 loss is not an actual carryforward that reduces current year taxable income. it represents 1231 losses (ordinary) claimed (deducted)  in prior years that is used to determine how current year 1231 gains are taxed. to the extent the current year 1231 gain exceeds these prior years 1231 losses the excess is capital (line 9a) while the rest is ordinary income ( lines 9c, 12 and 18) 

examples

(1) current year 1231 gain $50 - line 7

prior years losses $40 - line 8

line 9 $10 (net of lines 7 and 8

line 9a $10 (capital gain)

line 9c $40 (ordinary income) 

so taxable income would consist of $10 capital gain (schedule D line 11) and $40 ordinary gain (schedule 1 line 4)

in this case lined 8, 12 and 18 will be the same.  

(2) current year 1231 gain $50 - line 7

prior year 1231 losses $60 - line 8

line 9 would be negative so the instructions say it's $0 (the remaining $10 is 1231 loss carried over to next year)

line 9c would be $50 as would line 12 & 18. this flows to schedule 1 line 4 (from line 18)

there is nothing wrong with your results.