Can a capital loss from a trust be entered on K-1 line 4a if it is not a final?

A First point:   The ability to allocate, and pay, capital gains or distribute losses to beneficiaries is not only a matter of whether or not it is provided in the Trust document but also whether or not the resident state (that is, the state of residence for the trust, which is the state of residence for the trustee) in fact taxes gains at the Trust level and not at the beneficiary level.  You must determine that.  

In regard to capital gain,  some states will tax the Trust irrespective of whether or not the gain was distributed under the provisions cited following herein.

Under the traditional definition of fiduciary accounting income (FAI), capital gains (and inherently Losses) are typically excluded from distributable net income (DNI) and, thus, are taxed at the trust level. 

The implementation of the Uniform Principal and Income Act of 1997 (UPAIA) and the 2004 revisions to the regulations under Sec. 643 [15 U.S. Code §?634]  have provided fiduciaries with some flexibility in making distributions of capital gains but not losses to beneficiaries. Tax advisers should understand the options available under state law, including the "power to adjust" and "unitrust" provisions, and how those provisions intersect with Treasury Regs. Sec. 1.643(a)-3.

The fiduciary can pass the capital gains (as to losses, this would be unlikely) through to the income beneficiary only if the capital gain income can be included in DNI as described in Treas. Regs. §1.643(a)-(3), effective for tax years ending after January 2, 2004. The regulations state that capital gains (unclear how capital losses could be applied to DNI) are properly included in DNI to the extent that the governing instrument and applicable law, or by a reasonable and impartial exercise of discretion by the fiduciary, are: 

1. Allocated to income;
2. Allocated to corpus but treated consistently by the fiduciary on the trust’s books, records, and tax returns as part of a distribution to a beneficiary; or 
3. Allocated to corpus but actually distributed to the beneficiary or utilized by the fiduciary in determining the amount distributed or required to be distributed to the beneficiary.
4. Most practitioners assume (properly) that in a plain vanilla trust and under most state laws, capital gains usually are not included in fiduciary accounting income or DNI, so it is unlikely in a plain vanilla trust for capital gains to be included in income or DNI for item 1.
5. The best bet for including capital gains in DNI is either to find specific fiduciary discretion in the trust or to work with items 2 or 3. The question becomes, does the trust allow the fiduciary to allocate capital gains to trust income for either accounting or tax purposes? Because most state laws are derived from the Uniform Principal and Income Act (UPIA) and most states have adopted the Prudent Investors Act, any discretion provided by the trust or state law require the fiduciary to make impartial decisions, not ones based solely on the tax implications.

Capital Gains (but unclear as to statute or Act that capital Losses apply) can under certain conditions be included in the DNI calculation if any of the following apply:

1. The gain is allocated to income in the accounts of the estate or by notice to the beneficiaries under the terms of the will or by local law.
2. The gain is allocated to the corpus or principal of the estate and is actually distributed to the beneficiaries during the tax year.
3. The gain is used, under either the terms of the will to determine the amount that is distributed or must be distributed.

So, provision 1 would allocate gain to DNI and therefore would be taxable to the beneficiary.  Provision 2 would allocate gain to the Trust (and the Trust would pay the C/G tax) and gain proceeds are distributed. Provision 3 relates to when a fixed distribution is required and the income received is insufficient.  

To reiterate, many states that tax Trusts (indeed, those that also tax live persons) require that the gain be a taxable event within the trust irrespective of the proceeds being distributed.

HOWEVER:

1. The distribution deduction of the Trust is limited to the lesser of trust income (IRC §651) or DNI for simple trusts, or the lesser of distributions or DNI for complex trusts (IRC §661) 
2. DNI is the maximum amount of taxable income of the trust that is taxed to a beneficiary of a trust as the result of a distribution to the beneficiary as determined under IRC §643(a)