Domestic Production Activities /Trust AGI

[equinecpa]

I'm doing a simple 1041 (well I thought it was simple). The trust received a K-1 from a Partnership. In prior years the trust has accumulated large passive loss carryovers from this partnership. This year the K-1 has income of $40000, which is easily offset by the losses.

My question is their is a possible domestic production credit flowing through from the partnership. I have prepared the 8903 but when I come to AGI for the trust I'm ending up with 0 because the loss is offsetting the income.

Is this correct? I guess this is an ordering question -are the losses deducted from the Schedule E page 2, and then AGI computed?

Thanks

Carolyn

[BOB W]

This is not a credit, althought I know you mean an adjustment to AGI. If it cannot be used it is lost much like any other AGI deduction when total income is zero.

I reread you question and it would seem that it should appear on the appropriate ADJ line like most other adjustments. But when all is said and done>>>>it doesn't matter if it showed or not showed. The deduction is meaningless in this case.