179 recapture on 1120S

[Countingcat]

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?

[M-MTax]

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

[Mike9241]

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

[Countingcat]

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

[Countingcat]

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

[M-MTax]

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.

[Countingcat]

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.

[M-MTax]

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.

[Countingcat]

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.

[M-MTax]

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.

[ThomasM125]

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.

[Eland3907]

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

[Eland3907]

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

[AbrahamT]

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.

[CarolC]

@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.