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T
tahlstrom
Level 2
January 28, 2022
Question

Section 743(b) Special Allocation

  • January 28, 2022
  • 1 reply
  • 11 views

In the Partnership module for 2021, I'm seeing an M-1 adjustment on for a depreciation asset marked as Section 743(b) (Schedule K only) under the heading Regular Depreciation Special Allocation.  This code should not cause a M-1 line entry. 

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1 reply

joshuabarksatlcs
joshuabarksatlcs
Level 9
January 28, 2022

This discussion is based on my practice that:

1.  NO Section 754 adjustment is recorded on the book.

2.  The book balance sheet is used for Sch L on F1065.

The Sec 754 adjustments has to show up (on line 7a) of M1.  This is because Line 9 of M1 is NET of the 754 adjustment.   The Line 7a amount is needed to account for the book (NO 754 adjustment) and tax (YES for 754 adjustment) .

Without including the 754 adjustment on Line 7a, M1, your capital account balance (Line 9 of M2) would be off from your Sch L capital account balance.

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