Question

Why is 179 allocation required?

Forum|Forum|7 years ago
June 3, 2019
1 reply
0 views

I have 179 expense in a 'S" K1 which exceeds income. The difference should be a CO to 2017. There are also two(2) Partnership K1,s no 179. Same setup as 2016. This year Turbo Tax is requiring an allocation of the excess. Makes no sense. from directions I do not see a solution. How do I get around this so I can file the return.

TurboTax Deluxe Windows

Rick19744

Employee

Something doesn't make sense here.  For Section 179 there is a taxable income limitation at both the entity level and at the individual level.

In order to have allocated out the Section 179, there had to have been sufficient taxable income.  In determining taxable income it includes compensation paid to shareholder-employees.

You should have a form 4562 included with your return.  You need to look at line 11 to make sure it includes any wages paid to you.  I would suspect that this line needs to be adjusted and you should not have any limitation.

Additionally, the taxable income limitation at the individual level includes income from all trades or businesses.  If you are active in the 2 partnerships, and these have income, then this should also be included in determining whether or not you are allowed to take the Section 179.  If these have losses, and you are active, then you may have an issue.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.