Partnership with loss and section 179 deduction

[Quattes]

Hello,

I am working on a cash basis partnership return (2 partners 50/50 that materially participated) and have a question. The partnership has a net loss of $4k prior to a section 179 deduction of $9k. I know the section 179 deduction is disallowed for the partnership and carried forward to future years due to business income limitation, and I also know I need to reduce the basis of each partner for their share of the section 179 expense this year even though it is disallowed. My question is, do I need to enter each partner's share of the section 179 deduction in box 12 of each partners K-1 this year? Since it was disallowed and carried forward at the partnership level I wasn't sure.

Thanks for any advice. It is appreciated.

[Gretel]

no answer

...but this is a real good question. I have an idea what the answer is but will not share it since it's just an idea. Can't wait to hear a response from a pro.

[DaveinTexas]

No Partnership Expert

but, I recommend entering every figure from the K1, including the Section 179 expense on the personal return. Your software (most do) have a few additional forms to fill out along with the K1. Fill out the partnership basis worksheet and/or Form 6198 so your software tracks the carryover 179 to next year on the personal return. A good tax software tracks prior year unallowed losses (PYA) and other items of separately stated carryover items (non-deductible expenses, charitable contributions, etc).

Another strategy is to use Bonus Depreciation (if the assets are new and they qualify for BD). This depreciation isn't limited to business income/compensation and, if the partners have sufficient basis, there will be no carryover of depreciation. Instead their pass through losses are greater this year than in subsequent years. I would figure the depreciation using bonus along with Macrs Depreciation and see what results occur, then compare that to the Sec 179 carryover.

If this is a first year Partnership, it could be that they don't need the up front depreciation because their income is expected to increase in subsequent years. I always compare methods of expensing vs slower depr methods and let the client decide which direction to take.