How do I enter section 754 depreciation in turbotax business desktop 2023?

[PatriciaV]

Assuming you are preparing Form 1065 for a partnership, the entry for Section 754 depreciation can be found on Form 1065 p5-6 under Line 13(e)(C). Use code ZZ from the drop-down menu. What you enter here will also appear at the bottom of Line 13 under Type.

If you wish to specially allocate this amount, set up the allocation code for each partner on the Sch K-1 Worksheet, then enter that code in the box to the right of the amount on Line 13(e)(C). Be sure you have activated Special Allocations either on Schedule K Line 4b or in step-by-step under Business Info tab >> About Your Business >> Makes special allocations.

[MRR7]

I have the same problem and it relates to reporting K-1 figures on my 2023 personal return. Last year the K-1 reported code W for Section 754 depreciation, but this year it used the code ZZ ......which is "other". As a result, the depreciation isn't getting picked up. How do I adjust in TT so that the depreciation is properly subtracted when computing my share of partnership income?

[PatriciaV]

Please clarify which version of TurboTax you are using - Online or Desktop? Windows or Mac?

@MRR7 

[pbm-cle]

Last year sec 754 depr was W and automatically deducted.  This year it is ZZ and "other".  How do I get the deduction?  I'm using TT Home and Business-desktop.

[PatriciaV]

The IRS made extensive revisions to the coding for Schedule K-1, including additional codes for many lines. Box 13 Code ZZ requires additional information that can be entered using Forms Mode.

1. Open your return and click the Forms icon in the TurboTax header.
2. In the list of Forms in My Return on the left, scroll down and look for K-1 Partner for the investment you need to work on.
3. Click the form name to open it in the large window.
4. Scroll down to Line 13 and choose "ZZ" from the drop-down box. If you entered this using the Step-by-Step interview, the code may already be entered.
5. Click the QuickZoom box to the right of "QuickZoom to enter additional information for codes R and W to ZZ."
6. This opens Sch K-1 Additional Information.
7. Scroll down to Code W to ZZ, Line 4 Section 754 depreciation.
8. Enter the amount from Code ZZ here. If you right-click the amount and choose "About Section 754 depreciation," the On-Demand Tax Help explains that your entry will be used to reduce income for Box 1.
9. Click Step-by-Step in the header to return to the main screens.

@pbm-cle 

[skdoo800]

K-1 Box 13 contains code ZZ - where is the deduction value entered in the online version of TurboTax?

[PatriciaV]

It depends on what is reported in the Supplemental Information for Schedule K-1. Because information from Box 13 Code ZZ is left for the taxpayer to manually enter on appropriate tax forms (as needed), your entries for Code ZZ will have no effect on your tax return. In most cases, you can omit Code ZZ (and amounts) entirely. TurboTax will not use entries you do make for Code ZZ.

If you don't recognize or understand the code sections and other supplemental information for Code ZZ, you may need to consult a tax professional for assistance. It's possible these amounts may not affect your taxable income this year or may simply add/subtract from your partnership basis.

You may also consider upgrading to TurboTax Live. This online service provides step-by-step guidance from a tax expert whenever you need assistance, either over the phone or by screensharing.

@skdoo800