section 1231 loss carryforward - offset vs. regular capital gains?

The OP says: "So it seems to me that they have a carryforward 1231 loss."

But it seems to me that they incurred their section 1231 loss in a year that they won't get any benefit from it, and that the "unused" 1231 loss doesn't "carry over" to the next year. It seems to me that the section 1231 loss would go to page 1 of their tax return as an ordinary loss and just turn to dust there on page 1.

Or, possibly, did the 1231 loss become part of an NOL, that would then carry backward and/or forward? Totally different question, then.

It's an ordinary loss that gets posted on Line 14 of the 1040. This may or may not generate an NOL. Complete page 2 of Form 1045 to compute the NOL.

Thank you both!

I'll take a look there.

What confuses me is that I see that line 8 of the 4797 is for prior year nonrecaptured 1231 losses. So if the loss may or may not be converted to an NOL, when would it ever hit line 8 of the 4797?

David wrote: "...prior year nonrecaptured 1231 losses. So if the loss may or may not be converted to an NOL, when would it ever hit line 8 of the 4797?"

Prior year nonrecaptured 1231 losses are totally unrelated to carryover 1231 losses, even if there were such a thing as carryover 1231 losses.

Read up on "prior year nonrecaptured 1231 losses" to complete your confusion.

Thank you!

But David, you shouldn't thank me; it's bad and then it gets worse. Not only is the 1231 loss that gave you no tax benefit not going to carry forward and become a tax loss in the next year(s), but instead it's going to be a nonrecaptured section 1231 loss, which has the potential to convert some section 1231 gains (usually taxed as long-term capital gain) to *ordinary income* for the next five years! Maybe your "thank you" should be an ironic "thank you."