How do I resolve this error a Section 1256 Contracts and Straddles from a K-1

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September 19, 2024
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This is a little odd, but yesterday I was working on taxes and had no errors. I was getting ready to print taxes this morning, and now I have an error.

I have a $ 711 loss from Section 1256 contracts and straddles sales from a K-1. It transfers to that section, but now it is asking a question on Form 6781 that I don't know how to answer.

I checked Box D. The K-1 reports a Box 11 value of -711 and a ZZ code of -82.

How do I determine the amount of loss to be carried back?

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Best answer by Mike9241

I think I understand now. I normally have a gain on my K-1 from Section 1256 contracts. This year I have a loss. I can carry it back and spread it over previous years by amending my tax returns. By unchecking Box D, I gave up the option of going back and getting a refund by spreading the loss to earlier years, and the error goes away.

I think I understand your statement about combining numbers. When I input my data, I can enter a -87 on line 11zz. Or I can combine 11zz and 13zz and enter -87 for line 11zz. Is there a reason to combine them?

Thanks for your help. I get no errors now.

the instructions you presented say the 11 and 13ZZ should be combined and reported on schedule E line 28. so you can enter 11 and 13 separately and the link each to the form or do a net entry on 11 which would require only 1 linking. in either case the net result should be the same.

the error on the 6781 may be due to the fact that if c/b is elected, the amount of the carryback must be entered on line 6 of the form as a positive number. it can't be left blank but can be any number up to the current year 1256 loss.

Mike9241

what's 11ZZ? that could be anything

as for 1256 loss carryback, there is no requirement to c/b the loss that's for the taxpayer to decide provided they qualify. the loss c/b may be limited and is first carried back to the 3rd prior year

form 6781 instructions

The amount you can carry back to any prior year is limited to the smaller of:
• The gain, if any, that you would report on line 16 of Schedule D (Form 1040) for that carryback year if only gains and losses from section 1256 contracts were taken into account; or
• The gain, if any, reported on line 16 of Schedule D (Form 1040) for that carryback year.
The amounts just described are figured prior to any carryback from the loss year. Also, the carryback is allowed only to the extent it doesn’t increase or produce a net operating loss for the carryback year. The loss is carried to the earliest year first.

poncho_mikeAuthor

Line 13, Code ZZ: Other deductions – Trader expenses. For individuals, combine the values from lines 11zz and 13zz to determine whether you have a nonpassive income or loss. Reported on Schedule E, Line 28, (i) or (k).

My Box 1, 2, and 3 income was $ 0.

Mike9241

11zz has nothing to do with section 1256 c/b

[MODS] there's a bug in Turbotax desktop. In step-mode, there is no subscreen/dropdown to detail where the amount on line 11ZZ on a partnership K-1 goes. The only place you find out there's a problem is in final review

for OP the 11ZZ amount would need to be entered on line1 of the subschedule for the amount. OP, if you're using a desktop version you can go into forms mode, then to the k-1, and finally on line 11 click on the quickzoom link. to enter 11ZZ on line 1 of subschedule. decription - as given trader expenses.