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Trust K1, unallowed depr for bene

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    Trust K1, unallowed depr for bene

    A little issue but it gets real complicated:

    Trust owned Land A (no active participation) and Land B (active participation). 2014: Land A Income - $1,000, Land B Income: $1,500 and depreciation passed on to bene of $3,000. My software used the income from A and generated an unallowed loss of $2,000. Was this the correct way to do this? Had this been on a 1040 full depreciation would have been allowed since this TP qualifies for the special $25,000 allowance.

    In 2015 Trust was dissolved, no more income and assets transferred to bene for no consideration. There is no plan to file a 2015 trust tax return, other than with zero income and marked as final.

    1. Does the transfer from the trust to the bene qualify as disposition and passive loss of $2,000 is allowed?
    2. If not, it seems $2,000 is lost forever since this is land, which does not allow prior year losses.

    Any ideas are appreciated, I am rather unfamiliar with these issues on a trust level.

    #2
    Partial

    ...I found my answer to no. 1 - since this is not a sale it does not free any losses...

    It would be easier to find an answer if this loss was a trust loss but since this was deprecation apportioned directly to bene I am going in circles on what to do with the loss.

    Comment


      #3
      Why are they depreciating land?
      You have the right to remain silent. Anything you say will be misquoted, then used against you.

      Comment


        #4
        Good question, however they are not depreciating land but land improvements=fences.

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          #5
          Just in case

          ...someone is interested in the solution to this riddle: Land A was a farm rental and the way this was reported on the trust I missed that important part. When I changed the reporting on the 1040 to form 4835 instead of using Schedule E, it uses the carry-over passive loss. This all makes sense now.

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