Kentucky Limitation on Business Losses

Limitation on Business Losses
Form 461-K
FORM

461-K
Commonwealth of Kentucky
Department of Revenue

Enter name(s) as shown on Form 740 or 740-NP, page 1.	

KENTUCKY
LIMITATION ON BUSINESS LOSSES
  Enclose with Form 740 or 740-NP

2023

Your Social Security Number	

Part I—Total Income/Loss Items—Enter income/loss modified for Kentucky/federal differences
 1	

RESERVED........................................................................................................................................................................... 	1	

 2	
		

740 Filers enter amount from Schedule 1 (Form 1040), line 3 or
740-NP Filers enter from Form 740-NP, page 4, line 7, Column B....................................................................................... 	2

 3	
		

740 Filers enter amount from Form 1040 or 1040-SR, line 7 or
740-NP Filers enter from Form 740-NP, page 4, line 8, Column B....................................................................................... 	3	

 4	
		

740 Filers enter amount from Schedule 1 (Form 1040), line 4 or
740-NP Filers enter from Form 740-NP, page 4, line 9, Column B....................................................................................... 	4	

 5	
		

740 Filers enter amount from Schedule 1 (Form 1040), line 5 or
740-NP Filers enter from Form 740-NP, page 4, line 11, Column B...................................................................................... 	5	

 6	
		

740 Filers enter amount from Schedule 1 (Form 1040), line 6 or
740-NP Filers enter from Form 740-NP, page 4, line 12, Column B..................................................................................... 	6	

 7	

RESERVED........................................................................................................................................................................... 	7	

  8	

Enter other income, gain, or losses from a trade or business not reported on lines 1 through 7........................................... 	8	

  9	

Combine lines 1 through 8..................................................................................................................................................... 	9	

Part II—Adjustments for Amounts Not Attributable to Trade or Business
10	

Enter any income or gain reported on lines 1 through 8 that is not attributable to a trade or business................................. 	10	

11	
		

Enter any losses or deductions reported on lines 1 through 8 that are not attributable to a trade or business.
(See instructions)................................................................................................................................................................... 	11

12	

Subtract line 11 from line 10................................................................................................................................................... 	12	

Part III—Limitation on Losses
13	
		

If line 12 is a negative number, enter it here as a positive number. If line 12 is a positive number, enter it
here as a negative number.................................................................................................................................................... 	13	

14	

Add lines 9 and 13................................................................................................................................................................. 	14

15	

Enter $289,000 (or $578,000 for married taxpayers filing jointly or married filing separately on a combined return)............... 	15	

16	
		

Add lines 14 and 15. If less than zero, enter the amount from line 16 as a positive number on Form 740,
Schedule M, line 5 or Form 740-NP, page 4, line 16, Column B............................................................................................ 	16	

230205 42A461-K (10-23)	

Page 1 of 2

FORM 461-K (2023)

Instructions for Form 461-K

Purpose of Schedule—Form 461-K is used to calculate
excess business loss. Excess business loss is the amount of
the total deductions from your trade or business that exceeds
your total gross income or gains, plus the threshold amount.
The threshold amount for 2023 is $289,000 ($578,000 for
married taxpayers filing jointly or married filing separately
on a combined return). Form 461-K should be used if you
are an individual taxpayer and your net losses from your
trades or businesses are more than $289,000 ($578,000 for
married taxpayers filing jointly or married filing separately on
a combined return).
PART I—TOTAL INCOME/LOSS ITEMS
Use Part I to report all Kentucky income and losses. For
full year Kentucky residents, enter the amount from the
federal return modified for Kentucky/federal differences
adjusted. For nonresidents or part-year residents, enter
the amounts from the applicable lines on the 740-NP.
Line 1—RESERVED
Line 2—740 Filers enter any business income or loss
reported on Schedule 1 (Form 1040) line 3, or Form 1041,
line 3 modified for any Kentucky/federal differences. 740-NP
Filers enter amount from 740-NP, page 4, line 7, Column B.
Lines 3—740 Filers enter any capital gains or losses
reported on Form 1040 or 1040-SR, line 7; Form 1040-NR,
line 7; or Form 1041 line 4 modified for any Kentucky/federal
differences. 740-NP Filers enter amount from 740-NP, page
4, line 8, Column B.

Page 2 of 2

Line 9—Add lines 1 through 8 and enter on line 9. The
resulting figure can be a positive or negative number.
PART II—Adjustment for Amounts not Attributable to
Trade or Business
Use Part II to report the income, gain, or loss from your
tax return that’s not from a trade or business.
Line 10—Enter the combined amount of income or gain you
reported on lines 1 through 8 above that is not from a trade
or business.
Line 11—Enter the combined amount of losses or deductions
you reported on lines 1 through 8 above that is not from a
trade or business. See the definition for trade or business
below. Enter as a positive number.
Trade or business—An activity qualifies as a trade or
business if your primary purpose for engaging in the activity
is for income or profit and you’re involved in the activity with
continuity and regularity. The facts and circumstances of
each case determine if an activity is a trade or business. The
regularity of activities and transactions and the production of
income are important elements. You don’t need to actually
make a profit to be in a trade or business as long as you
have a profit motive. However, you do need to make ongoing
efforts to further the interests of your business.
Line 12—Subtract line 11 from line 10. The resulting figure is
your gain or loss that is not from a trade or business. Use this
amount in Part III to figure your excess business loss.

Line 4—740 Filers enter any other gains or losses reported
on Schedule 1 (Form 1040), line 4, or Form 1041, line 7
modified for any Kentucky/federal differences. 740-NP Filers
enter amount from 740-NP, page 4, line 9, Column B.

Part III—Limitation on Losses

Line 5—740 Filers enter any supplemental income or loss
reported on Schedule E, such as income from rental real
estate, royalties, partnerships, S corporations, estates, trusts,
REMICs, etc. This is reported on Schedule 1 (Form 1040),
line 5, or Form 1041, line 5 modified for any Kentucky/federal
differences. 740-NP Filers enter amount from 740-NP, page
4, line 11, Column B.

Line 14—Add lines 9 and 13. The resulting figure can be a
positive or negative number.

Line 6—740 Filers enter any farm income or loss reported on
Schedule 1 (Form 1040), line 6, or Form 1041, line 6 modified
for any Kentucky/federal differences. 740-NP Filers enter
amount from 740-NP, page 4, line 12, Column B.
Line 7—RESERVED
Line 8—740 Filers enter any other trade or business income,
gain or loss not reported on lines 1 through 7 that you reported
on your tax return modified for Kentucky/federal differences.

42A461-K (10-23)	

Use Part III to apply the threshold limitation and figure
the excess business loss.

Line 16—If the resulting figure on this line is a negative
amount, then it is your excess business loss. Although it is
a loss, you will report the excess business loss adjustment
as a positive number. 740 Filers will enter this amount on
Schedule M, line 5 and 740-NP filers will enter this amount on
the 740-NP, page 4, line 16. Enter as excess business loss.
Your excess business loss from each year will be treated as a
net operating loss carryover. This amount will be entered on
the Schedule KNOL.