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S-Crop QBI is including previously taken section 179 as an addition to QBI. When K-1 flows through to personal return there is no adjustment being made to Back this out.

Level 1

I have worked up an S-corp return and the associated individual return and my QBI number on the K-1 from the S-crop is inflated by prior section 179 taken.  I have no proceeds or gain.  After entering in the transaction at the individual level there is no reduction of QBI for the previous addition of Prior section 179 to the S-Crop QBI.  So, no proceeds, no recapture but I get QBI.  Seems software is inflating QBI.  Is there any considerations to be made in the software input section or should I just expect to manually override this when I see it?  

Previous answers to similar questions identified the issue would resolve its self at the individual level, but I do not see the software making considerations of that sort.

Thanks,

Example:  S-crop Ordinary income of 100k,  Previous section 179 taken on assets disposed is 38k,  proceeds = 0,  recapture = 0 assets were old and no proceeds received.  Lacerte is taking the 100k of Ordinary income and adding the 38k as a QBI income under "Ordinary gain (Loss) on disposition of Section 179 assets" for a total QBI of 138k.  At the individual level, there does not appear to be an adjustment to reduce QBI by the 38k to bring it down to the 100k which is what I'm expecting.

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Accepted Solutions
Intuit Alumni

Currently the calculation for Partnership and S-corp does not include an adjustment or consideration for Section 179 in Lacerte. There is an ongoing investigation on this matter, and you can find more information or receive updates here: https://accountants-community.intuit.com/articles/1796713-inv-25078-partnership-and-s-corporate-calc...

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11 Replies 11
Intuit Alumni

Currently the calculation for Partnership and S-corp does not include an adjustment or consideration for Section 179 in Lacerte. There is an ongoing investigation on this matter, and you can find more information or receive updates here: https://accountants-community.intuit.com/articles/1796713-inv-25078-partnership-and-s-corporate-calc...

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Level 1
I was with support for an hour tonight trying to explain this to them.  They insisted their calculation is correct, which we both know is absolutely NOT correct.  I submitted a calculation challenge and IRC references so hopefully they'll fix this soon.  I don't want to spend my time overriding my software for the whole season.
Level 1

Why is this listed as solved?

I see no explanation as to why prior section 179 taken is picked as a 1231 loss on assets disposed or no longer in service for the QBI calculation.

Lacerte, please explain your position taken. 

Level 1

I feel like I have the same circumstances as listed above, but with the exact opposite result. I have an S-Corp with business income and a disposed asset with Section 179 taken in a prior year, just like kmitch. Again, no gain, loss, or recapture. My K-1 shows a reduction in QBI (specifically a Section 1231 loss) in the amount of the Section 179 deduction. If I were to use kmitch's numbers above instead of my own, my K-1 is kicking out QBI of $62k instead of the $100k as I would expect as well. 

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Level 1

Jeremy, I have the same issue as you.  On the QBI statement, the prior year sec 179 is showing as a 1231 loss and reducing my overall QBI.  Don't understand it treating the disposition of junked assets as 1231 loss. Seems there should be no gain/loss showing.  

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Level 2

I'm noticing the same issue as Jeremy, the opposite is happening to me.  Zero proceeds, zero gain/loss on the disposition of prior 179'd assets.  Lacerte is reducing the 1231 Gain/Loss on the QBI Stmt A by the Section 179 amount taken on those assets.

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Level 1

It appears this still isn't resolved.  Have you found any more info on this?

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Level 1

Looks like this is fixed.

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Level 1

Thanks for the heads up JeremyV.  It looks like it is fixed!

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Level 2

the wrong place to reply but I cannot find the reply button. Question is that if I want to read thru all of these questions and replys it only shows 1-9, then you have to click on 9 and then it opens up 10 aznd 11, so you click on 10 and then 11 and then it opens up 12 and 13. Is there a way to just easily go thru all of them?

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Level 1

ProSeries and Lacerte are treating the difference between the original cost and proceeds on disposition of an asset that has been fully written off with Section 179 as a reduction of QBI income.  This negative amount is showing on the 199A statement as a 1231 loss.

A 1231 loss is created when you dispose of an asset for less than its book value, and a 1231 gain is created when you sell an asset for more than its original cost.  

An asset with a zero book value cannot generate a 1231 loss.  

In my case, truck bought in a previous year for $30k and fully depreciated with Section 179.  In 2019 the truck was sold for $14k.  This creates a $14k gain, of depreciation (Section 179) recapture.  ProSeries is showing a $16k reduction of QBI income ($30-14=16).  

ProSeries grudgingly opened a Case today, but keeps insisting it is correct.  

The program does not do the same thing with an asset that has been fully written off with depreciation (not Section 179).  

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