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Level 4
posted Jan 11, 2021 12:17:04 PM

179 recapture on 1120S

We are an S-corp and I sold assets that need a 179 recapture of depreciation.  The 1120S form does not have a place to report this.  I read something about the recapture being reported on the Schedule K's.  My depreciation expense is not showing the recapture either.  Can someone please explain how this is being handled?  Where would I verify the amount is showing on the Schedule K?  Do I need to enter it on the Schedule K manually?  If so where.  Do I do enter it anywhere on the 1120s?

0 15 4936
15 Replies
Level 12
Jan 11, 2021 12:30:48 PM

Need to put that on your 1120S as sale of asset and should flow to K-1 with a report.

Level 15
Jan 11, 2021 12:44:01 PM

the gain should appear on form 4797 part III and will show up on a separate line on schedules K and K-1

Level 4
Jan 11, 2021 2:03:12 PM

Why does my 1120s not include form 4797?  The 179 disposition report does not allow me to record the recapture either.

 

Level 4
Jan 11, 2021 2:16:36 PM

Why are the gains on the sale being deducted from my total income?  It's causing a negative net income.

Level 12
Jan 11, 2021 3:19:20 PM

The gain will not appear on a 4797....it is a PRO RATA SHARE item. It goes on your K-1s on line 17 and there should be a statement alongside that detailing the sale and 179 expense.

Level 4
Jan 11, 2021 5:54:04 PM

Thanks.  I'm seeing the statement.  The Disposition Report does not show the recapture.  Should I enter it?  It requires me to override the field to do so.

 

Also, as the sales resulted in a gain, shouldn't my net income be increased?  TurboTax is deducting it from my income resulting in a negative net income.

 

 

 
 

 

 

 

Level 12
Jan 11, 2021 6:07:01 PM

Not familiar but pretty sure that gets entered in the interview.....look for a Sec 179 page for an entry. This whole thing about 179 is because when an S corp deducts under 179 the shareholders get that deduction so when it's recaptured the shareholders take the hit for that.

Level 4
Jan 11, 2021 6:26:08 PM

The interview asked for the sales date and price but never recalculated the depreciation for recapture.  Even so, why would a gain result in a reduction in income? This happens on M-1.

Level 12
Jan 11, 2021 8:10:20 PM

No clue about what's happening in TT Biz but you normally have to put in the amount of the Sec 179 deduction taken in the past.

Expert Alumni
Jan 13, 2021 9:35:05 AM

There should be an option in the Your Total Business Income section to choose Dispose of Business Property. When you work through that section TurboTax will automatically pick up prior year section 179 if any and properly account for it when you enter your sales information. The sale will be reported on a supplemental schedule attached to the shareholder's K-1 form that is called Shareholders disposition report for all assets with sect 179 expense taken, it will look like this:

 

 

You will see an entry on line 17 of the shareholders' K-1 referencing the statement.

 

It may be that you didn't report the section 179 depreciation in TurboTax when you set up the asset, in which case it might not be dealt with properly when you sold it. If so, you can delete the asset an re-enter it and then report the sale.

Level 1
Jan 14, 2023 12:56:32 PM

Thank you.  However, K-1 does not have an amount in #17 for the amount to use.  What columns (that are completed ) are used to generate the amount that should be used.  Is it column (h)-Amount of Section 179expenses deduction taken? Thank you

Level 1
Jan 14, 2023 1:03:30 PM

Sorry, Column (h) appears on the Shareholder's Disposition Report for all Assets with Section 179 Expense Taken.

 

Level 8
Jan 19, 2023 2:23:56 PM

 

Apparently, the supplemental schedule spit out a Section 179 depreciation figure which is ultimately used in the sales calculation for figuring out the Depreciation Recapture to be used. Although, nothing is showing in  Box 17, we have all the information we need on this Supplemental schedule. So , I would go with the amount recorded in Column h and ignore the fact that nothing appears in Box 17. It sounds like a technical issue as to why something like  *See accompanying supplemental schedule doesn't appear.

 

Level 6
Mar 1, 2023 4:53:58 AM

@AbrahamT  Where would bonus depreciation recapture appear on the K-1 for an S-corp?  And the same logic - applied at the owner level - and reported on Form 4797?  Thank you.

Expert Alumni
Mar 1, 2023 7:04:35 AM

The instructions for Form 1120-S, Page 1, (Net gain (loss) from Form 4797) state, "Corporations should not use Form 4797 to report the sale or other disposition of property if a section 179 expense deduction was previously passed through to any of its shareholders for that property. Instead, report the information in Box 17 of Schedule K-1 using Code K, disposition of property with section 179 deductions.

 

As mentioned by @AbrahamT In the business income section of TurboTax you will have the option to Choose Dispose of Business Property. When you work through that section TurboTax will automatically pick up prior year section 179 if any and properly account for it when you enter your sales information. The sale will be reported on a supplemental schedule attached to the shareholder's K-1 form which is called the Shareholders disposition report for all assets with sect 179 expenses taken.

 

See IRS Instructions below:

 

Click on IRS.Gov.  Search Form 4797 and review the sale of section 179 property section:

 

Form 4797

 

@CarolC