A Section 465 (d) carryover refers to the ‘at-risk’ rules of Section 465 of the Internal Revenue Code. Under that section, your losses are limited to the amount you have at risk in the activity. A loss that was disallowed because of the at-risk rules is generally treated as a deduction from the same activity in the following tax year (ie. carried over).
The amount you see for Section 465(d) carryover is the amount of loss you weren't able to take last year, but may be able to take this year.
If you are certain you didn't have a Section 465 (d) carryover from prior years, you can clear this up by adding a negative "Miscellaneous" expense and describe it as "Section 465 (d) carryover offset".
For more information see IRS Pub. 925 - Passive Activity and At-Risk Rules
Here is additional information regarding "at risk" and "at risk carryover losses":
At risk is a test that the IRS uses to see if you can deduct losses from certain investments and business interests that you own.
The basic rule is that you can't deduct a loss from your investment or business interest if the loss doesn't actually cause you to lose money.
Money you've invested in your business that is not at risk can include:
- 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.
AT-RISK CARRYOVER LOSSES:
If your business had a loss last year, and if it was limited because of the at-risk limitations (not the passive limitations), you should have already included last year's unallowed at-risk loss as an "other expense" on the applicable business schedule (Schedule C, E, F or Form 4835). For Partnerships and S Corporations, the unallowed at-risk loss should be entered on the appropriate line of the related Schedule K-1 At-Risk Limitation Allocation Worksheet.