topic I have a 743 (B) capital basis adjustment on my K1...how do I enter that into turbotax personal in Business & farm

I have a 743 (B) capital basis adjustment on my K1...how do I enter that into turbotax personal

pmontague1968 — Thu, 06 Jun 2019 15:21:52 GMT

Inside/outside basis for the 743(b) election is accounted...

AmandaR1 — Thu, 06 Jun 2019 15:21:54 GMT

Inside/outside basis for the 743(b) election is accounted for by the partnership and reflected in the amounts and codes on your schedule K-1. All you need to do is enter your schedule K-1, exactly as reported to you and the software will ask any necessary questions.

Let us know how it goes and if you have any questions specific questions while entering the form.

Re: Inside/outside basis for the 743(b) election is accounted...

I_dont_understand_my_k1 — Sat, 16 Mar 2024 18:36:28 GMT

Hi k-1/1040 experts. I sure do still have box 20 code U 743b adjustment questions.

My K-1's always come with an entry in box 20 code U that says STMT and my understanding is that the requirement for the additional information it's referencing is this, according to the instructions for people that prepare k-1s:

For each partner, the total Sec. 743(b) adjustment net of any cost recovery as a single amount for all asset categories; and a statement showing the amount of each remaining Sec. 743(b) basis adjustment, net of cost recovery by asset category.

The corresponding footnote in the K-1 is always a table that for several asset categories (in this case, "buildings" and "land") lists three columns:

SECTION 743(B) ORIGINAL BASIS

SECTION 743(B) ACCUMULATED DEPRECIATION/AMORTIZATION

SECTION 743(B) REMAINING BASIS

The third column is, of course, what you get when you subtract the second from the first.

I feel like turbotax wants me to enter a single number for Box 20 line U and I think that single number is "the total Sec. 743(b) adjustment net of any cost recovery as a single amount for all asset categories" and I further believe that the partnership thinks I know how to generate that from the little table, but the partnership is wrong about that; I have no idea.

I've been ignoring this for years because I assume this basis adjustment only matters when the limited partnership is somehow disposed of or has some other kind of event. But maybe I am wrong about that?

So my questions are whether any number entered for box 20 code U actually affects the form 1040, and if so, how am I supposed to generate it from the little table the partnership provides?

Thanks!

Re: Inside/outside basis for the 743(b) election is accounted...

Rick19744 — Sun, 17 Mar 2024 00:06:16 GMT

You should have inquired about this at the beginning of this investment:

If you have not accounted for this on prior year returns, then you may want to consider amending your tax returns.
The actual Section 743(b) adjustment should be reflected on your K-1 in Part III box 13 Code V.
This amount should be netted with the amount in either box 1 or 2 of your K-1.
The information in box 20 is just an overall picture of your Section 743(b) adjustment. It reflects the total amount of the adjustment (original basis), the cumulative amount allocated to you (accumulated depreciation / amortization), and then the remaining adjustment that will be allocated in future years until you either sell the investment or the adjustment period is complete.

Re: Inside/outside basis for the 743(b) election is accounted...

I_dont_understand_my_k1 — Mon, 25 Mar 2024 01:23:54 GMT

Thanks for that reply, @Rick19744

So there is indeed always something in Box 13 Code V, and it's always a number that shows up a few times in the K-1 as the "Section 754 Depreciation Deduction", and for the past few years in a new statement labeled "Section 199A Information Box 20 Code Z".

It seems to me that, since the advent recently of some new question-asking in turbotax (2022, I think?) about the section 199A information and QBI, turbotax has started automatically deducting the "Section 754 Depreciation Deduction". which I used to have to do myself.

I notice that when turbotax deducts that amount, it does so by creating a schedule E line item labeled "Sec 743(b) adj" for each K-1, which winds up looking a lot like the way I used to do it, which involved creating an extra K-1 for the deduction so it also got it's own schedule E line. Except I used to title the k-1's as "<original entity name> Sec 754 adjustment"

So apparently section 743(b) and section 754 stuff is related. I don't understand any of it.

The question I was asking was basically related to the fact that the turbotax interview and k-1 worksheets want me to enter a single number for box 20 code U, which is supposed to be the "the total Sec. 743(b) adjustment net of any cost recovery as a single amount for all asset categories" and the partnership doesn't give me a single number, only a table with lots of numbers.

It looks like this, but of course not the real numbers:

DESCRIPTION	SECTION 743(B) ORIGINAL BASIS	SECTION 743(B) ACCUMULATED DEPRECIATION/AMORTIZATION	SECTION 743(B) REMAINING BASIS
OTHER DEPRECIABLE ASSETS	10000	9000	1000
LAND	1000	0	1000

I found some IRS instruction clarifications for partners that I think in a section labeled FAQ 6 suggests the number the partnership is supposed to be providing me is the total of the two numbers in the last column of this table, in this case $2000.

But I also continue to believe that the number in Box 20 Code U is not used anywhere in the form 1040; I can type any number in there and it doesn't change anything. 😀

Re: Inside/outside basis for the 743(b) election is accounted...

PatriciaV — Mon, 25 Mar 2024 13:01:36 GMT

Yes, the amount to enter for Code U is the total of the last column (remaining basis). The instructions you mentioned from the IRS FAQ6 are correct.