If a trust incurs a net operating loss or a capital loss, the trust beneficiaries may deduct the losses under the "conduit" theory for their taxable year within which the trust year ends.

Question

Quizplus · Accepted Answer

Trust beneficiaries cannot directly deduct a trust's net operating loss or capital loss on their personal tax returns. Losses of a trust are generally trapped at the trust level and do not pass through to beneficiaries.

If a Trust Incurs a Net Operating Loss or a Capital