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Entering S Corporation K-1 line 17, Code K in the Individual module

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Entering S Corporation K-1 line 17, Code K in the Individual module

 

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 module, you'll need to follow both sets of instructions below.

Follow these steps to enter Section 179 recapture:

  1. Go to Screen 17, Dispositions.
  2. Select Carryovers/Misc Info from the left-side navigation menu.
  3. Scroll down to the Form 4797 section.
  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 Screen 17, Dispositions.
  2. Under the Dispositions (Schedule D, 4797, etc.) section, enter any applicable fields.
  3. Scroll down to the Form 4797 section.
  4. Enter "-1" in the field Depreciation allowed (-1=none, triggers 4797).
  5. Scroll down to the Corresponding Activity Information - Passive (8582) / At-Risk (6198) / Investment Tax (8960) / Qualified Business Income (QBI) section. 
  6. Select Schedule E (S corporation) from the Form number of related activity (Ctrl+T) dropdown menu.
  7. Enter the Activity name or number (Ctrl+T).
  8. Check the Include in at-risk/basis limitations box.
  9. 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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