Help with NOLs from rentals in final year of an estate

nancyphillips · ‎02-05-2021

I'm getting a diagnostic stating the rules below

469(j)(12)Special Rule for Distributions by Estates or Trusts

If any interest in a passive activity is distributed by an estate or trust—

469(j)(12)(A)

The basis of such interest immediately before such distribution shall be increased by the amount of any passive activity losses allocable to such interest, and

469(j)(12)(B)

Such losses shall not be allowable as a deduction for any taxable year.

This is an estate with several rental properties and huge losses carrying forward. This is the final year and the remaining properties are being distributed. Currently, it has NOLs flowing through on the K-1. The rules seem fairly straight forward, but I'm not sure how to show this on the return. Should I take the NOL and divide it between the rental properties by adjusting the basis up then use an override to get rid of the NOL carry forward?