For K-1 LLC partnership, Box 13 code W- other deductions, can the “section 754 depreciation” box be checked off for a section 743 depreciation?

pobox00001 · ‎June 6, 2019

In TT Home and Business, it will ask for additional Code W details. The list of options does show a "Section 754 Depreciation" that can be checked off. The Descriptive information from my K-1 states: "Section 743(B) Depreciation Adjustment..... $amount".

The issue is that if I check off that it is a Section 754 depreciation, it reduces my taxes.

However, it I place it under the "Other Description Enter Below" - there is no change to my tax- also I cannot easily find another place to enter this information.

I have tried to understand the complexities of Sec. 743(b) adjustments and how it may affect inside versus outside basis of a partnership. Honestly, still confused, but nonetheless, just would like to know that Section 743 is a subcategory under a Section 754 election and so checking off that this item is a "Section 754" would be acceptable.

THANK YOU in advance for any advice on this.

Rick19744 · ‎June 6, 2019

Yes, you should check the box for the Section 743(b) election. This is a "sub" election under Section 754.

This adjustment should reduce your tax as it is a deduction.

This is a complicated area of the partnership provisions......well actually all partnership provisions are complicated.

I assume from the limited facts that you acquired an interest in the LLC and paid more than the adjusted basis, which is also known as the inside basis. Since you paid more, the assets were stepped-up to equalize this difference and that is why you are receiving additional depreciation allocated to you. This provision alleviates you from potentially paying tax a second time.

*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.

CPAwithnotaxes · ‎March 19, 2021

I am having a big problem with a partnership tax return. It was done by a CPA for me and I am trying to use Turbo Tax Business (TTB). TTB does not have a way to handle inside basis (for basic depreciation) and the additional depreciation due to the section 754 stepped up basis. It impact both the schedule K and all the K-1s. I have spent hours on this and it is very frustrating!

Can anyone help me? I have tried going to Forms, but it does not permit overrides on these key fields.

thanks!

For K-1 LLC partnership, Box 13 code W- other deductions, can the “section 754 depreciation” box be checked off for a section 743 depreciation?

Business & farm

Business & farm