Not to complicate things more, but the Tax Cuts and Jobs Act added a limitation on excess business losses for non-corporate taxpayers (Section 461(l)). For 2023, this limits business losses to $289,000 for single filers ($578,000 for joint filers). Any excess gets carried forward. So if your business losses are huge, you might hit this limitation before you can offset all your capital gains. Just something to keep in mind if you're dealing with large numbers.

Great question about capital vs ordinary losses! I went through this exact situation when I started my consulting business. One key point that might help clarify things: ordinary business losses from Schedule C (sole prop) or pass-through entities like LLCs are much more flexible than capital losses. They can offset ANY type of income - W2 wages, capital gains, interest, dividends, etc. - without the $3,000 annual limitation that applies to capital losses. So yes, your $13k LLC loss can absolutely offset capital gains from your investments, and there's no specific order required. The loss just reduces your total taxable income on your 1040. For your deferral question - if your business losses exceed all your income in a year, the excess becomes a Net Operating Loss (NOL) that you can carry forward indefinitely under current rules. However, there are annual limitations on how much NOL you can use each year (generally 80% of taxable income). One thing to watch out for: make sure you understand the "material participation" rules. If the IRS considers your business activity "passive" (meaning you don't actively manage it), then those losses can only offset passive income, not your W2 or capital gains. The interaction between different loss types can get complex, so definitely consider consulting a tax professional for your specific situation!

One thing nobody's mentioned - if you're over 70.5 years old, consider Qualified Charitable Distributions (QCDs) from your IRA instead of donating appreciated stock. You can donate up to $100,000 annually directly from your IRA to qualified charities, and it counts toward your Required Minimum Distribution without increasing your AGI. It's often better tax-wise than donating appreciated securities for people in this age group. But the money has to go directly from your IRA custodian to the charity - no DAFs allowed for QCDs.

Great discussion here! I've been wrestling with this same question for months. One aspect I haven't seen mentioned yet is the investment growth potential within DAFs. When you contribute appreciated stock to a charitable account, those funds can continue to be invested and potentially grow before you distribute them to charities. This means you could end up giving significantly more to your chosen causes over time compared to immediate direct donations. For example, if you donate $10,000 in appreciated stock to a DAF and it grows at 7% annually, after 5 years you'd have about $14,000 to distribute to charities - all while getting the immediate tax deduction on the original $10,000 contribution. The flip side is you're taking on investment risk, and the fees do eat into returns. But for those who want to "batch" their charitable giving in high-income years while spreading distributions over time, the growth potential can be compelling. Has anyone factored this into their decision-making process?

Has anyone dealt with Form 8082 (Notice of Inconsistent Treatment) in a situation like this? We had to file one when we inherited partnership interests because the K-1 didn't reflect the stepped-up basis.

This is exactly the type of complex trust and partnership situation that trips up even experienced tax professionals. Based on what you've described, here are the key steps you need to take: First, you absolutely need to establish the stepped-up basis for your grandfather's partnership interests as of his date of death. This should have been documented in the estate proceedings, but if not, you may need to get a retrospective appraisal of the partnership interests' fair market value on that date. Second, since the trust distributes all income to your aunt, it sounds like a simple trust for tax purposes. This means the gain from the property sale will flow through to your aunt's personal tax return via a Schedule K-1 from the trust. The tricky part is that the partnership's K-1 to the trust likely doesn't reflect the stepped-up basis from your grandfather's death. You'll probably need to file Form 8082 (Notice of Inconsistent Treatment) to report different amounts than what's shown on the partnership K-1, adjusted for the stepped-up basis. I'd strongly recommend getting a CPA who specializes in trust and partnership taxation to help you navigate this. The interplay between the stepped-up basis, trust taxation rules, and partnership reporting requirements is complex enough that you want professional guidance to avoid costly mistakes. Don't rely solely on the partnership managers or even general tax preparers for this - you need someone who understands these specific intersecting areas of tax law.

Has anyone here actually calculated whether a C-Corp blocker is worth it from a tax perspective? I'm trying to compare potential tax savings from avoiding UBTI vs. the corporate tax the C-Corp will pay plus potential double taxation on dividends.

This is a fascinating discussion that really highlights the complexity of SDIRA structures. As someone who's been researching this area extensively, I want to add a few practical considerations that haven't been mentioned yet. One thing I've learned is that the custodian you choose for your SDIRA can make a huge difference in how smoothly these complex structures work. Not all custodians are comfortable with C-Corp blocker arrangements, and some have additional requirements or restrictions that can complicate the setup. Also, don't forget about ongoing compliance costs. Between corporate tax filings, potential state franchise taxes, maintaining proper corporate formalities (board meetings, resolutions, etc.), and the additional accounting complexity, these structures can get expensive to maintain. I've seen people spend $3-5K annually just on compliance costs alone. That said, for larger investments where UBTI would be substantial, the tax savings can definitely justify the complexity and costs. The key is running the numbers carefully and making sure you have the right professional team in place - not just for the initial setup, but for ongoing management and compliance. One last thought: consider starting with a smaller test investment in this structure before committing significant retirement funds. It's a good way to understand how all the moving parts work together in practice.

Has anyone here back filed with just the 1040 forms from the IRS website? Or do you really need to use tax software for each specific year? Im trying to save money and wondering if I can just download the forms for each year and fill them out myself.

Just wanted to add something that might help - when you're gathering documents for back filing, make sure to check if you have any 1099s you might have forgotten about. I missed a 1099-INT from a savings account that only had like $12 in interest, but it still needed to be reported. Also, if you can't locate all your documents, you can request wage and income transcripts from the IRS for free through their website or by calling. These transcripts show what income documents were filed under your SSN for each year, which can help you identify any missing paperwork. The good news is that most people in your situation end up getting refunds for the years they didn't file, especially if you had taxes withheld from your paychecks. So don't stress too much - you're likely going to be pleasantly surprised once you get everything sorted out!