K-1 Question

[gowithmygut]

I always wanted to be a CPA I just didn't think I had the personality for it. I do my own taxes using Turbotax and am hoping someone can help me out; as you have done in the past.

I am involved in a partnership that changed tax preparers this past year. The 2004 K-1 Part lll line one had an entry that was income less depreciation and amortization. That was the number I entered on Schedule 1040 line 17.

This year the K-1 Part lll line one shows income only. There is a notation on line 13 Part lll that says to see an attachment. That attachment contains the depreciation and amortization totals. Any thoughts on why the different approach to completing the K-1? How do I enter the depreciation and amortization amounts? Thanks for the help.

[Bees Knees]

Depreciation and amortization should be subtracted from line 1 of the K-1 if it is from normal business operations. Depreciation and amortization would be listed separately on line 13 of the K-1 if it is specially allocated to the individual partners. You would need to find out from the preparer of the K-1 why it is separately listed on the K-1.

As to the reporting, simply enter the partner's share of deductions from line 13 on a separate line in Part II of the Schedule E right under where the K-1, line 1 income was reported using the same partnership ID number with the description depreciation and amortization. If it is new MACRS property for this year, it should also be entered on the 4562. Also make sure that SE tax is reduced accordingly.

[gowithmygut]

Thanks for the informative response. Yes, depreciation is separately allocated to the partners based on the time they bought into the partnership. The discription used is a Section 754 adjustment. Should I have any concern about the previous manner of K-1 preparation? Depreciation is approximatly 50% od income so it is a pretty big number. Again thanks for the help.