First time getting a K1-1041

I believe the K1 results in the same effect as a long term capital loss you'd incur.

Unlimited offset of your year's capital gains, then $3000 against ordinary income.

Given the software you use can handle this, just enter a mock return. I do this for planning all the time. It will confirm my answer, and also might help you with tax planning for this year, e.g. you might wish to take some gains, or just prefer to offset income at your marginal rate.

Follow up - when I'm even the slightest bit hesitant, I tend to seek a

100% accurate answer to share. I did the test return myself. Disclosure

- I've handled a K1 for over 20 years, myself, but never produced a loss. The K1 will always reflect distributed dividends, and actual cap gains.

In this case, I entered the $12,000 loss and confirm it did what I initially answered, offsets gains, and if not used up (offsetting $12K of gain) it can then offset $3000 of ordinary income. Anything more will carry to next year. The $24 is an itemized deduction you need to manually enter as such. The K1 form itself doesn't quite show the details I'm sharing. It's the entry form on the tax software itself.

vs the form itself This shows what I'm saying about the $24. If you don't itemize, just enter it there, but ignore it, no harm, no foul.

Thanks for the replies and info. I plugged the -12000 into a 1040 what-if, and I saw that it reduced ordinary income by the $3000, and reduced the final tax on the QD&CG worksheet. Nice.

I am assuming that I will be able to do the deduction for 4 tax years, reducing the amount by $3000 each year. And my Free File and the IRS will track same.

Thanks again.