Section 754 and 743(b) depreciation is usually used to reduce the income reported on the K-1 from the partnership side. A section 754 depreciation adjustment reported on the supplemental information page of a K-1 doesn't usually need to be reported anywhere on the individual tax return.
You can make sure that the adjustment doesn't need to be entered, by reviewing the supplemental information to see if the depreciation adjustment is reducing the net income.
To manually enter the adjustment if it hasn't already been used to reduce K-1 income:
- Go to Screen 20, Passthrough K-1's.
- Select the appropriate K-1 entity.
- Select Separately Stated Income and Deductions from the lower left section menu.
- Enter the amount of the adjustment as a negative figure in the line Other (Ctrl+E) for passive items, or Other nonpassive items (Ctrl+E) for nonpassive items.
