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Section 179 Business income limitation is not including depreciation recapture

Level 4

My client has an active trade or business farm on schedule F.  He sold some equipment that was fully depreciated, so there is depreciation recapture on form 4797.  One asset has a capital gain on it in addition to depreciation recapture  He also bought new equipment and will be fully depreciating the new equipment with section 179.  Proseries is not including the depreciation recapture in the business income limitation on form 4562, line 11.  It does include the capital gain though.  The only way I can get the business income limitation to be correct is to put the correct adjustment on line 3b of the form 4562 depreciation options.  Is this how proseries handles this? Or is there a checkbox somewhere that I should have checked on each asset with depreciation recapture?

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1 Comment 1
Level 15

I *THINK* the program is doing it correctly.

Depreciation recapture isn't really business income.  Section 179 is limited to business income (which does include §1231 gains).  See §1.179-2(c).  It specifically mentioned §1231 gains, which seems to imply that §1245 recapture is not part of it.

If you RIGHT click line 11 of the 4562, the pop-up help menu says how it is calculated, and it seems to say the same thing as the Regulation that I mentioned.