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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10156
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I have a schedule K-1 (Form 1041) provided by the law office

Customer Question

I have a schedule K-1 (Form 1041) provided by the law office who did the probate of my mother-in-laws home after my mother-in-law passed away October 2014. It shows excess deductions on termination at $574 and a short term capital loss carryover at $2,627. The excess funds were calculated at 25% of $2,294 which was my portion of the estate (25%). The capital loss does not show any calculation. Seven family members (including myself) received a portion of her estate. I usually do my own taxes and I will itemize this year.
Can I take the whole $2,627 as a capital loss? What do I do with the $574?
Submitted: 10 months ago.
Category: Tax
Expert:  Lane replied 10 months ago.

Hi,

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Yes, If the estate has capital losses or excess deductions for its last tax year, they are allowed to the beneficiaries.

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It's important to note that (1) this must be the final year of the estate, and (2) both types of losses generally keep their same character for the beneficiary as they had for the estate., so the capital loss will flow to your schedule D (BUT given the size of the capital loss, if you have no other capital GAINS to use it, you still get to net (the rule is up to 3000) against ordinary income.

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Excess Deductions on Termination go into the Other Deductions section of Form 1040’s Schedule A (Itemized Deductions).

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So as with all itemized deductions subject to the 2% AGI rule (which this one is) you have two hurdles (1) more than 2% of your Adjusted Gross Income to allow any tax benefit. and (2) you must itemize (itemized deductions must be over your standard deduction).

Expert:  Lane replied 10 months ago.

Hope this has helped … Please let me know if you have any questions at all.

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If this HAS helped, I'd really appreciate your positive rating … (by using the stars or rating request on your screen) … … That’s the only way JustAnswer will credit me for the work.

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Thank you,

Lane

Expert:  Lane replied 10 months ago.

Did you see my answer? (Sorry for the data dump, just wanted to cover the bases)

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Bot***** *****ne, you can use the capital loss (1st against capital gains and then against ordinary income).

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And the excess deductions can be used as well IF you itemize and the 2% floor doesn't whittle it away.

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Let me know if you need more here.

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Lane

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