How to enter section 1250 recap for a prior year installment sale on a Form 1065

[Debra 7]

Partnership had an installment sale in 2018 and return was prepared in proseries.  Migrated to Proconnect  for 2024 returns (suggest you don't do this as the help screens don't relate to the line input items on the returns and tech support takes hours at a time).  Only part of the carryforwards populated in Proconnect.  I am trying to get line 9c on Schedule K and appropriate amounts on the K-1s, line 9c.  There are no help screen instructions for what to put in the input fields.  If anyone has any guidance as to how to complete the input screens, please advise!  

[George4Tacks]

Put a brief phrase in SEARCH BOX select ProConnect in the filter and you can likely find what you want. Then post here if you are not successful.

I think this is what you want 1250 Recapture

[PhoebeRoberts]

This is one where you have to kind of know where to look, and sometimes it's easier to do a dummy prior-year return and roll it over and see where everything turns up in the next year. Screenshots are from Lacerte, but ProConnect is pretty similar.

You want to set up the prior year disposition in Screen 19 Dispositions. Leave the top sections entirely blank. You want the subsection(s) for P/Y Installment (6252) and Installment Sale Principal Payments Worksheet.

Lacerte's F1 Help on the field called "Remaining unrecaptured section 1250 gain" says:

Remaining Unrecaptured Section 1250 Gain
Installment Sale (6252) Screen 19; Code 160

In August 2000, the IRS issued final regulations (1.453-12)on how to report unrecaptured section 1250 gain from installment sales. The general rule is that unrecaptured section 1250 gain (subject to the 25% tax rate) must be recognized before any other capital gains (subject to the 20% and 10% tax rates). This rule is applicable to all installment payments received after August 23, 2000. For installment payments received after May 6, 1997, and on or before August 23, 2000, the IRS will not challenge the recognition method used. However, if under the alternative method a lesser amount of unrecaptured section 1250 gain was recognized on each installment payment than under the general rule, the lesser amount is used to determine the balance of unrecaptured section 1250 gain to be taken into account. For installment sales before May 7, 1997, it is deemed that unrecaptured section 1250 gain had been taken into account before other gains for those payments received after the date of sale but before May 7, 1997.

Enter the remaining unrecognized balance of unrecaptured section 1250 gain. The program carries the lower of the entry in this field of the amount of gain recognized on the installment sale for the current year into the return as unrecaptured section 1250 gain subject to the 25% tax rate. If a different method for recognizing unrecaptured section 1250 was used for payments on or before August 23, 2000, use "Unrecaptured 1250 [O]" (Screen 16, code 157) to override the automatic calculation.

[Debra 7]

Thank you both for your responses.  However, I do know what the 1250 recapture amount remaining from the original sale is, and it is on the proper line of the bottom part of the installment sale input sheet.  I also know what the amount is supposed to be, but the program is carrying the full amount of the gain recognized in the current year as all being 1250 recapture, when the original return and carryforward worksheets provide that only 52% of the current year gain is 1250 recapture and therefore subject to the 25% rate.  The problem is that the program is carrying the full amount to the Schedule K, line 9c, and also to the K-1s.  I cannot find how to input the information so the correct amount will flow through.  Yes, I also see that it can be overridden, but I don't like to override something that the program should do correctly.  An override wouldn't help fix the issue that will be there when it is time to prepare the 2025 tax return.  Proseries has an actual worksheet that was part of the 2023 return.  The 1250 recap worksheet was correct, but it didn't populate when the data was converted from proseries to proconnect.  

[PhoebeRoberts]

"The general rule is that unrecaptured section 1250 gain (subject to the 25% tax rate) must be recognized before any other capital gains (subject to the 20% and 10% tax rates). This rule is applicable to all installment payments received after August 23, 2000. "

Your prior return was doing it wrong. You're gonna have to override if you want the current year return to do it that same wrong way.

Alternatively, what you have is a sale of multiple assets, where only 52% of them had 1250 gain. In that case, you can split it into two separate installment sales, or you can override.

[Debra 7]

Thanks,  but I know how to calculate the proper 1250 recap, in accordance with IRS guidelines.   Again,  the issue isn't how to do the recap, but how to enter it into proconnect so that IT calculates the proper amount on line 9c of schedule K in the 1065.  After spending over an hour with tech "support", they could not tell me or provide any instructions for completing the bottom half of the 6252 input for a prior year installment sale.  Proseries had the worksheet,  apparently  Proconnect does not.  The prior return was correct. The help screens aren't helpful like Proseries.

[George4Tacks]

@PhoebeRoberts gave a very nice explanation, but image was for Lacerte. Here is an equivalent (using some cut and paste) for ProConnect. Possibly that will help.