Level 2

Rental Real Estate 1065 and Sec 179

Forum|Forum|1 year ago
March 8, 2025
3 replies
27 views

My client has a partnership which conducts rental real estate activity. He has a net income after expenses. He has Sec 179 expenses which would offset the net income, but it is disallowed because of passive activity rules.

However, he can qualify as a RE professional. The problem is that the software will not flow the Sec 179 to the K-1 because it is disallowed and carried forward. How do I enter the appropriate portion of the Sec 179 expenses to flow to the K-1 so it can be used on the personal return?

sjrcpa

Level 15

the Partnership is not a Real Estate Professional.

The more I know the more I don’t know.

D

Devildog8589Author

Level 2

no the partnership is not, but I need to flow the sec179 to the k1 for the partner who is eligible to take the deduction

sjrcpa

Level 15

You're working on the 1065?

Have you considered using bonus depreciation instead of 179?

The more I know the more I don’t know.

T

TaxGuyBill

Level 15

@Devildog8589 wrote:

How do I enter

You haven't told us what software you use, so we can't tell you how to enter something.

D

Devildog8589Author

Level 2

I'm using ProSeries

T

TaxGuyBill

Level 15

@Devildog8589 wrote:

the software will not flow the Sec 179 to the K-1

Section 179 is only allowed for a "Trade or Business".

ProSeries automatically assumes a rental property does NOT rise to the level of a Trade or Business.

Does your client's rental rise to the level of a Trade or Business?

If so, look at line 11 of Form 4562. Double click it for the Depreciation Options sheet and enter the rental profit [well, that is how it is done with 1040s; I suspect it is the same for the 1065).

D

Devildog8589Author

Level 2

I agree. In a Passive Activity Sec 179 is not allowed, which is why nothing is being taken and it is assumed to be disallowed and carried forward. The exception is if the person is a Real Estate professional with all the IRS requirements. The client has the qualifications, so what I want to do is give him the Sec 179 deduction by flowing into his K-1.

I can't find anywhere that I can make this election so he is treated as a RE pro or do I just manually enter the correct info on his K-1 and the 4562 and adjust the carryforward?

sjrcpa

Level 15

The trade or business determination is made at the Partnership level first. I don't think you can do what you want to on the 1065.

The more I know the more I don’t know.

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