Partnership Return

[S T]

Here is either an observation and/or question on a Form 1065 Partnership Return

2011 Form 1065 rejected that a "DIY" tried to complete thru Turbo Tax ---- so restating with corrections to file.

While restating - observation - Assets purchased entered as Sect 179 - and when K-1s were completed - nothing passed through to Partner's K-1 form - No notation of Sect 179 per Partner K-1 form ( I think there should have been at least a notation on K-1 - Line 12 with maybe a schedule from Turbo Tax)

When I re-state and enter into my Software - I just let the system automatically elect the Special Allowance for 2011 - all of the "allowed" transfers" to the Partner K-1 forms and all is incorporated reflected in K-1 Line - Ordinary business inc.(Loss.)

Observation is that Special Allowance default becomes Ordinary business loss/income, but if opt out of Special Allowance and elect Sect 179 - it is not reflected in Line 1 of the K-1 form and the Sect 179 would be reflected on Line 12 of the Partner's K-1 form.

Hmm

Seems like the Special Allowance could be a better option?

What are the "pitfalls" of claiming Special Allowance versus Sect 179?

Thanks

Sandy

[Jesse]

I opt for the section 179 expense on assets totalling $25,000 or less because that is the maximum section 179 allowed for the state of Wisconsin. It is messy - extra schedules and calculations to keep track of - when adjustments need to be made to adjust the federal adjusted gross income to the state return adjusted gross income.

There are two CPA's in our neighborhood that tend to do the special depreciation instead of Section 179 and I can't help but wonder if it is so they can charge extra for the extra state schedule I, possibly someone can correct me on that?

[S T]

Thanks Jesse, Not a State Issue as it is Texas - but I can see your "point" on State Adjustments - Just wondering if there were some other "issues" claiming Sp Allowance vs Sect 179

Sandy

[Lion]

I think 179 can't take you into a loss; special allowance can.

[S T]

Lion - Noted! That is where I am at on this LLC-Partnership

Special Allowance has created a loss that will be suspended due to basis, and in the alternative if I use Sect 179 will be passed through onto the Personal 1040 Return - to be used if there is other wage income or business income on Form 1040 on the Member/Partner Return (Not necessarily "privy" to that info)

New "Company" for 4th Qtr 2011" and am setting up QB - so far 2012 looks Positive Income ---2011 Tax Returns are on Extension - "Hindisght" is good yes?

Thinking that the Suspended loss will be okay to offset some 2012 Income on the LLC Partnership Member/Partner K-1 ---- "partnership/member" pass through for the one Partner/Member

Any other considerations for Special Allowance versus Sect 179 - such as "recapture" if assets disposed of early??

Thanks,

Sandy

[Davc]

179 is limited at the entity level to:

Total net taxable income from all trades or businesses
actively conducted by the entity, without considering:
• The Section 179 deduction, credits, tax-exempt income,
and guaranteed payments.
• Shareholder-employee compensation.
• Partner’s allocable share of taxable income.

before it gets to Schedule K.