“The trust has a loss of $1700.00 (from sale of stock equities) and dividends of $400.00. Therefore there is a net loss to the Trust. Is there a minimum amount that needs to be a loss to carry it forward?”========>Up to $3000 of the capital loss will offset other trust income.Capital losses offset capital gains in determining DNI. So,trust losses offset trust gains, if any, and excess trust losses are carried forward IN THE TRUST until the following year(s). However, the carryforward losses will be usable to reduce the trust's gains next year or whenever the trust will next experience gains. The best use of the losses is to retain them in the trust to offfset trading gains in the future, and hope the trust is profitable enough and continues long enough to use them up. $3,000 of excess can offset ordinary income each year, so the trust could retain the $3,000 of income tax free. The net effect is to shift $3K from taxable income to trust capital. If the trust requires distribution of all income every year, the $3,000 retention by the trust may not work. It may only require the trust be Complex rather than Simple each year. Also, the $3,000 can be inreased by any deductible expenses and the $100 Exemption.
the distribution in the final year of the trust can only be taken by the beneficaries on their 1040 Sch A.. All losses are lumped together and lose their identity (short versus long term). Excess final year deductions (expenses exceed income) would appear in Box 11-A of Form K-1, and would be reported by beneficiary on his Sch A, subject to the 2% minimum. once the 1041-K-1 distributes losses as B or C in Box 11 they go onto the beneficiaries' Sch D/ 8949, and then his Capital Loss Limitation worksheet and effectively they are carried forward forever( and don't expire). Also, tho they keep their character as long or short term, when you run out of one kind any gains offset any losses. So once within the CL being short or long makes no tax difference until only one kind of gain remains, and is not offset by losses, and is to be posted on 1040 line. 13 e