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Examine the Schedule K-1 that you received. If the last date on the top of the page is in 2012, you report the information on your 2012 Form 1040. Schedule D has a line (it was line 12 on the 2011 Schedule D Form 1040) that says, "Net long-term gain or (loss) from partnerships, S corporations, estates, and trusts from Schedule(s) K-1." Enter your loss on that line. If there are not enough gains to absorb the loss, page 2 of Schedule D will indicate how much is deductible currently. You enter the amount not deductible currently on next year's return. Line 14 of the 2011 Schedule D (Form 1040) is for a long-term capital loss carryover. Use that line for reporting any remaining loss in future years.
Your Schedule K-1 loss will first offset long-term capital gains from the same year. If the loss isn't absorbed that way, it offsets short term capital gains. If a loss still remains, you can reduce future ordinary income by up to $3,000 per year on page one of Form 1040 until you use up all of the loss.
If there is no 2012 date on the Schedule K-1, you should amend your 2011 Form 1040 to report the loss. The Schedule K-1 you received will have a bold 2011 at the middle of the top line. Immediately under that bold 2011 you'll see "For calendar year 2011, or tax year beginning ______, 2011.” If the last amount on the "and ending" line is 2012, you report everything on your 2012 return.
Mary Kay Foss, CPA, is a director at Sweeney Kovar, LLP, in Danville. You can reach her at (925) 648-3660(925) 648-3660.
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In accordance with IRS Circular 230, the information on this website is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.
