As an individual, I received a form K-1 showing moderate passive income and a small Sec. 179 deduction. I have no other Sec. 179 amounts to report. How do I report this? I think the appropriate way is to include this amount on Form 4562. The software I am using from H&R Block does it differently. It reports the Sec. 179 deduction as a loss directly on Page 2 of Schedule E on the same line that it reports the income from the K-1. Which is right? Both? Neither?
With the caveat that I am NOT familiar with your software and am NOT attempting to tell you how to make your software work, I'll jump in with my
2 cents.
Ordinarily, Sec 179 passes through to Page 2 of Schedule E and gets reported as a separately stated item just like the income or loss from the activity reported to you on the K-1. For disclosure purposes you may need to include a Form 4562 and a list of the assets which were included in the Sec 179 amount but the amount itself should wind up on the Schedule E.
I am curious so I'll ask - you think the amount belongs on Form 4562. Where do you think it goes from there?
Form 4562 is where you report depreciation, including accelerated depreciation. But it NEVER stops there, it ALWAYS goes someplace else - Schedule C, Schedule F, Schedule E - page 1 or 2, somewhere. So where do you think it goes once it leaves Form 4562?
I also saw where you noted that you are a passive owner in this enterprise. Depending on the details, you may not get a deduction on your personal return due to being passive. There are several items that could limit deductibility of your losses - maybe you have no passive income, or maybe your other income is high enough that these losses phase out and get suspended. I'm concerned that the issue you have may be bigger than just where the Sec 179 amount goes.
The 179 deduction is limited at both the partnership level and the individual level. Therefore you need to list the partnership number on your own Form 4562 to compute the limitation on your form 1040. The deduction will then be caried to the same form that the income is reported on.
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