Section 179 Recapture

[MP91]

We are dissolving Partnership LLC Pass Through.  179 Section assets' were distributed to partners. We calculated Recapture  and entered it in form 4797 of 1040. Where this Recapture from form 4797 should flow in our case (Pass Through Partnership)?

[MelindaS1]

On Form 1040, look at Line 8 "Additional income from Schedule 1, line 10", this is where it should end up to be taxed as ordinary income. On Schedule 1, look at Line 4 "Other gains or (losses). Check if any from Form(s): 4797" and the box should be checked, with the amount listed next to the box on line 4. 

Note: if your passthrough entity income typically reports on another line on Schedule 1, such as "Line 5 Rental real estate, royalties, partnerships, S corporations, trusts, etc. Attach Schedule E" it may be mapped to that location, depending on your entries. Compare with the prior year tax return PDF to verify. 

[MP91]

On Enterable 4797, page 2, line 35 we have $443 as a recapture amount.  

On Form 1040,  Line 8 "Additional income from Schedule 1, line 10" is 0 (so it did not flow there).

Also On Schedule 1,  Line 4 "Other gains or (losses)  nothing  is from Form 4797, and box is not checked. I cannot check it on my own.

We do not have any sales or rental business. Only recapture amount under section 179, part 4 of 4797

Please advise, since I do not see it flows anywhere

[PatriciaV]

The amount from Schedule K-1 Line 20 Code M for Recapture Section 179 Deductions must be re-entered under Box 11 Code ZZ in order to appear on Schedule E, page 2 Part II, flow to Schedule 1 Line 5 and on to Form 1040. There is no need to use Form 4797 (Enterable).

[MP91]

Unfortunately when entered  under Box 11 Code ZZ it does not flow like you described

[MelindaS1]

As you may already know, this won't flow automatically from the K-1; the information for each partner will be reported on the respective Schedules K-1, and then each individual recipient partner will input their own 1040 Form 4797 based on that K-1 information. The 1040 Schedule 1 will pick it up from the 4797. From the 2025 instructions for Form 1065 K-1 Line 20:

Code L. Dispositions of property with section 179 deductions. This represents gain or loss on the sale, exchange, or other disposition of property for which a section 179 deduction has been passed through to partners. The partnership must provide all the following information related to such dispositions (see the instructions for page 1, line 6, earlier). 

• Description of the property. 

• Date the property was acquired and placed in service. 

• Date of the sale or other disposition of the property. 

• The partner’s share of the gross sales price or amount realized. 

• The partner’s share of the cost or other basis plus expense of sale (reduced as explained in the instructions for Form 4797, line 21). 

• The partner’s share of the depreciation allowed or allowable, determined as described in the instructions for Form 4797, line 22, but excluding the section 179 deduction. 

• The partner’s share of the section 179 deduction (if any) passed through for the property and the partnership’s tax year(s) in which the amount was passed through.

(con'td)

Per the above, use box 20 Code L to report this information. See also: distributions of property on K-1 Line 19b.