If a client gets a K-1 (1065 Partnership K-1), and has a Net 1231 loss of -100,000 in the current year because they disposed of the activity in the current year, is there a loss carryover that can be used to offset any oridinary or capital gain income that is NOT Section 1231 property in the following year? Or is the Net Section 1231 loss in the current year lost because the actiivity was disposed of in the current year and that accelerated all of the losses to the current year and the client losses out because they did not have any income to be offset by the Net Section 1231 loss of -$100,000? If it can be used in the following years how is it reported? Thank you in advance for taking the time to answer this question.
Treat a 1231 loss as ordinary loss on form 4797. A taxpayer can have a net operating loss (NOL) if a Section 1231 loss reduces income below zero. A taxpayer may carry back the NOL for two years, and carry the rest forward for up to 20 years, or just carry it forward 20 years. The NOL can reduce any type of income, not just capital gains.
Awesome thank you for the explanation!! Posted by Ken on 04/04/2012 @ 5:55 PM
To the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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