My client has a zero basis in his S-corp which passed through an ordinary loss and 179 deduction. I filled in the 6198 and included on line 4, the 179 deduction. My software rightly did not enter the ordinary loss on Sch E Page 2, but carried the 179 deduction to the 4562, the Sch E Page 2 and then to page 1 of the 1040, even though the 6198 included the 179 amount in the total suspended loss amount. Am I missing something? Is it because he had sufficient salary to recognize the 179 deduction despite his zero basis? I am confused.
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I am too...
Peachie, I am too.
I am assuming you didn't file the K-1, or you wouldn't have created this awkward situation. In other words, you have a client who is stuck with some mess of a K-1 which shows both a loss and a s.179 deduction. I always thought the s. 179 deduction for any entity was limited to profit and could not be used to create a loss. Then the overall s.179 dollar limit applied to every filer, corporate or individual.
Your 6198 accommodates the s.179 independently for purposes of the overall limit so this doesn't surprise me.
But again, what do I know??? -
In determining S-Corp income for the 179 limitation all shareholder wages are added back at the Corp level. You then apply the limitations again on the 1040.Comment
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