I am preparing an S corporation return with a federal and state difference related to a section 481(a) adjustment, (prior year depreciation difference when filing a form 3115). How do I record this federal and state difference on the form 8825 and the K-1. The federal 481(a) adjustment is recorded in other expenses on the federal return.
Thanks for you help.
I don't think Screen 44 would do the job. The "Other additions" or "Other deductions" would adjust Form 100S Page 1, for the computation of the state tax. The items would not be carried over to Sch K or the K-1's.
If I understand the issue correctly, the difference in 481 adjustment would affect the State Sch K and thus K-1's, and there would be a difference on Sch /K-1 Line 2 (net rental real estate income). Correct me if I'm wrong here.
If the above is correct, the problem is that there is NO separate column for state expenses on Form 8825 input. Years ago, I made a request for a separate column OR add a separate item on the bottom for the state (currently the "State Amounts IF different" include only 4797, Amort, Depr and Tax) There should be an Other addition or Deduction there).
If in fact you need to show a different amount for CA on the state Sch K / K-1, I would override the on the bottom (State Amounts if different) for the depreciation line by the state depreciation plus or minus the 481 adjustment. On the supplemental note, I would explain the federal state difference by stating
1. General description for the 481 difference plus
2. a recap:
Federal depreciation $xxx
State depreciation diff yyy (If this is applicable)
State 481 Adjustment bbb
-------
$ zzzz
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