If a trust owns rental real estate that has an operating loss for the year, and other income (interest, dividends) are they netted out before determining numbers for the beneficiaries' K1s? Or is line 7 "net rental income" a negative number? or something else? Is such a loss passed on to the beneficiaries subject to the beneficiaries' limit on passive loss deductions? Or, how is this situation handled?
thanks.
I have trust experience, but not with real estate. (warning) In a year that the *stock* loss zeroed dividend gains and then some, the loss carried to the next year (within the trust), it's not given to the beneficiaries.
My understanding is consistent with that - a trust can distribute (and deduct) taxable income to beneficiaries. But I'm not aware of a provision that allows a trust to distribute losses except in its final year.
___ Stu
so what if the trust has both income and losses. e.g. dividend and interest income, and capital loss and/or rental activity loss?
Is it netted out at the trust level, and then the net income distributed, or the net loss carried over in the trust? If a loss is carried over in the trust, how can it be used by the trust?
If the trust distributes taxable income, it takes a deduction on that income, and the beneficiary-recipient recognizes it as taxable. If the trust has losses in addition, well, it just has less taxable income to set it off against.
___ Stu
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