Why are Section 1231 Loss Carryovers showing up on the carryover form when they have been used in prior years?

[mapleton2009]

Why are they still showing up when it shows they were used on the Form 4797 for the years in questions ??

[itonewbie · Accepted solution]

If you're certain it's been caught up and you don't see this being a problem on multiple returns, I'd make the adjustment and call it a day.  If it's any consolation, I don't recall others raising this as a problem on this board.

If you want to know why, you will need to contact Support and they'd probably ask to see the return, then take time to diagnose, and may eventually come back with an inclusive answer.

[rbynaker]

Are you talking about these (attached)?

This is where ProSeries tracks the last 5 years worth of 1231 losses.  The short answer, it's an IRS anti-abuse rule that prevents you from using losses from one year to offset regular income at regular tax rates and then using gains in any of the five subsequent years to get capital gains tax rates.  Future gains are taxed at ordinary tax rates to the extent of your 1231 losses in the five preceding years.  This is where ProSeries tracks those amounts.  If that's what you're asking about, don't delete them, they may be necessary in order to prepare an accurate return in the future.

[itonewbie]

Thought the OP says it's all caught up.

[rbynaker]

These things are widely misunderstood.  I think what the OP means by "they have been used" is that the losses have been used on prior tax returns (to reduce other income).  Not that the carryover information has been used on prior tax returns (to adjust the rate which was applied to 1231 gains.)  AFAIK ProSeries tracks these things accurately since, as you pointed out, no one else is complaining. 🙂

But your guess is as good as mine.

[rbynaker]

PS: I would have put this in the "request more details" section but the only way I know to attach an image is by making it an answer.

[itonewbie]

You could be right.  Hopefully, the OP would come back with more info.