Separate Share Trust - final year for one share

[Saniam29]

The Trust has a capital loss carryover.  There are two shares and the loss carryover has been tracked over a few years, so I know what portion is allocated to each share.  It is the final year for one share and that beneficiary will receive a final K-1.  It would seem correct to pass through that portion of the loss carryover, and I can override on the K-1 to do so.  Do you think this is correct?  If so, how do I allocate that portion to beneficiaries on the Schedule D, so that the capital loss carryover to the Trust for 2024 is reduced?

[BobKamman · Accepted solution]

§ 1.663(c)-1 Separate shares treated as separate trusts or as separate estates; in general.

(b) The separate share rule does not permit the treatment of separate shares as separate trusts (or estates) for any purpose other than the application of distributable net income. It does not, for instance, permit the treatment of separate shares as separate trusts (or estates) for purposes of:

(1) The filing of returns and payment of tax,

(2) The deduction of personal exemption under section 642(b), and

(3) The allowance to beneficiaries succeeding to the trust (or estate) property of excess deductions and unused net operating loss and capital loss carryovers on termination of the trust (or estate) under section 642(h).

[Saniam29]

 Appreciated - lesson learned.