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Entering S Corporation K-1 line 17, Code K in the Individual return of ProConnect Tax

SOLVEDby Intuit1Updated July 31, 2023
 

When an S corporation sells or disposes of an asset for which a Section 179 expense deduction was previously taken, the resulting gain or loss isn't reported on the S corporate return. Instead, the information needed to compute any gain or loss and Section 179 recapture is passed through to the shareholder(s) on line 17, Code K of the Schedule K-1.  

To report Section 179 recapture on Form 4797 and K-1 gain or loss on Schedule E in the Individual return, you'll need to follow both sets of instructions below.

Follow these steps to enter Section 179 recapture:

  1. Go to Input Return Income Dispositions Schedule D, 4797, etc.
  2. Select Carryovers/Misc Info from the top right corner.
  3. Select the 4797 Carryovers tab.
  4. Locate the Recapture 50% or Less Business Use subsection.
  5. Enter the total amount of recapture in the Section 179 expense deduction field.
    • This input flows to Form 4797, line 33.

Follow these steps to ** enter Section 179 recapture as ordinary income and link it to Schedule K-1:

  1. Go to Input Return Income Dispositions.
  2. Under the Dispositions Schedule D, 4797, etc. section, enter any applicable fields.
  3. Select Details on the right side of the screen and click the Sale of Asset 4797 tab.
  4. Enter "-1" in the field Depreciation allowed (-1=none, triggers 4797).
  5. Select the Less Common Scenarios tab.
  6. Scroll to the  Corresponding Activity Information - Passive (8582) / At-Risk (6198) / Investment Tax (8960) / Qualified Business Income (QBI) section. 
  7. Select Schedule E (S corporation) from the 
    Form number of related activity (Click on arrow to select from list) 
    dropdown menu.
  8. Enter the Activity name or number (Click on arrow to select from list)
  9. Select the Include in at-risk/basis limitations box.
  10. Under the Passive Disposition subsection, enter a 3 in the 1 = Complete Disposition, 2 = Partial, 3 = Separately stated on K-1 field.
    • You should complete this field if the asset being disposed of was used in a passive activity.
    • This input reports the Section 179 recapture as ordinary income on page 1 of Form 4797 and page 2 of Schedule E. It also includes the recapture in basis calculations.

 

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