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Screen K1-3 - Schedule K-1, 1065 / 1120S - Deductions (1040)
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Partner's / Shareholder's Share of Deductions
Section 179 expense deduction
Enter the section 179 expense passed through in this field. The allowable deduction calculates automatically. Amounts you enter here combine with amounts you enter in the 4562 screen and are subject to basis, passive-loss, and at-risk limitations, if applicable.
Noncash contributions… / Capital gain property…
From the Schedule K-1, use the attached statements to enter the noncash contributions subject to various AGI limits. Also, enter the adjusted basis of the property contributed by the entity.
For partnerships and S Corporations, the amount of the adjusted basis of the property will be subject to basis and at-risk limitations, if applicable. The difference between the Schedule K-1 amount and the adjusted basis, plus the adjusted basis of the property after applying any applicable basis or at-risk limitation, will transfer to Schedule A, line 12.
If the entity provided a copy of Form 8283, Noncash Charitable Contributions, it must be attached to the 1040 return. If the total claimed deductions exceed $500, Form 8283P1 and a supporting statement detailing the amount appearing in Form 8283P1, column G, generate automatically.
Investment interest expense - Schedule A
Enter investment interest expense for this activity to report it on Form 4952 and to deduct it on Schedule A. All amounts are subject to basis and at-risk limitations, and amounts on Schedule E are subject to passive-loss limitations, if applicable.
Investment interest expense - Schedule E
Enter investment interest expense to report directly on Schedule E. All amounts are subject to basis and at-risk limitations, and amounts on Schedule E are subject to passive-loss limitations, if applicable. Amounts you enter here don't go to Form 4952. If the amount should be limited, enter the limited amount here.
Debt financed acquisition interest
Enter the amount of debt-financed acquisition interest allocated to trade or business assets or expenditures. This amount reports in Part II, Schedule E on a separate line as "passive interest" if the activity is passive or as "business interest" if the activity is not.
Royalty expenses
Enter royalty expenses for Schedule E, Page 1. No limitations or preferences will calculate based on data you enter here. If you have the UltraTax/Oil & Gas module, enter this information in the OGWell screen.
Intangible drilling costs / Intangible drilling costs - nonproductive wells
Enter the intangible drilling costs that will be expensed as reported on Schedule K-1 for this entity. These amounts will go on Schedule E, Page 2 on a separate line as "Section 59(e)(2) expensed." All amounts are subject to basis, at-risk, and passive-loss limitations, if applicable. If you have the UltraTax/Oil & Gas module, also enter this information in the OGWell screen.
note
When the taxpayers elect to amortize intangible drilling costs, enter the intangible drilling costs in the asset module instead of in this screen.
Enter
X
for intangible drilling costs to be deducted on Schedule SE when self-employment income (Box 14A) is present.Section 59(e)(2) expenditures expensed not amortized: Circulation expenditures
Enter the circulation expenditures that will be expensed as reported on Schedule K-1 for this entity. These amounts will go on the Schedule E, Page 2 on a separate line as "Section 59(e)(2) expenditures." All amounts are subject to basis, at-risk, and passive-loss limitations, if applicable. For alternative minimum tax purposes, the expense is deductible ratably over three years. A preference item equal to the regular tax expense less the one-third amount allowed for minimum tax purposes is created for Form 6251, line 2o - Circulation costs. When basis, at-risk, and passive-loss limitations are applicable, use the ratable expense allowed for AMT purposes on the AMT version of those worksheets. Report any difference between regular tax and AMT expense on Form 6251, lines 2m or 2n.
note
The remaining unused alternative minimum tax deduction will proforma to next year.
Section 59(e)(2) expenditures expensed not amortized: Research and experimental expenditures
Enter the research and experimental expenditures that will be expensed as reported on Schedule K-1 for this entity. These amounts will go on the Schedule E, Page 2 on a separate line as "Section 59(e)(2) expenditures." All amounts are subject to basis, at-risk, and passive-loss limitations, if applicable. For alternative minimum tax purposes, if the activity is passive, the expense is deductible ratably over ten years. For the passive activity, use the ratable expense allowed for AMT purposes on the AMT version of the basis, at-risk, and Form 8582 worksheets. Report any difference on Form 6251, line 2m.
note
The remaining unused alternative minimum tax deduction will proforma to next year.
Section 59(e)(2) expenditures expensed not amortized: Mining exploration and development costs
Enter the mining exploration and development costs that will be expensed as reported on Schedule K-1 for this entity. Amounts you enter here go on Schedule E, Page 2 on a separate line as "Section 59(e)(2) expenditures." All amounts are subject to basis, at-risk, and passive-loss limitations, if applicable. For alternative minimum tax purposes, the expense is deductible ratably over ten years. A preference item equal to the regular tax expense less the one-tenth amount allowed for minimum tax purposes is created for Form 6251, line 2q - Mining costs. When basis, at-risk, and passive-loss limitations are applicable, use the ratable expense allowed for AMT purposes on the AMT version of those worksheets. Report any difference between regular tax and AMT expense on Form 6251, lines 2m or 2n.
note
The remaining unused alternative minimum tax deduction will proforma to next year.
Deductions - portfolio other
Enter the deductions attributable to this activity's portfolio income. This amount goes to the appropriate line on Schedule A.
note
Report state and local taxes, except real estate taxes on Schedule K-1, in the A screen in the applicable field, if they are not to be considered as deductions related to portfolio income.
Amounts paid for medical insurance
Enter the amount of nonspecified health insurance premiums paid in conjunction with the insurance plan established or considered to be established with this activity. However, if the taxpayer obtained the specified premiums via the Health Insurance Marketplace, see the notes section below. The self-employed health insurance deduction calculates automatically for Page 1, of the 1040 (or 1040NR) return.
note
- This field is only available for partnerships.
- If the taxpayer did not obtain the insurance plan for this activity via the Health Insurance Marketplace – that is, they paid the premiums for health insurance coverage for this business in a plan that is not a qualified health plan (i.e. all premiums paid are considered nonspecified premiums) – the SE health insurance deduction calculates using the Self-Employed Health Insurance Deduction Worksheet, which is based on the worksheet in IRS Publication 535, Business Expenses. Any amount not allowed as a Page 1 deduction automatically transfers to Schedule A as a medical deduction.
- If the taxpayer obtained the insurance plan for this activity via the Health Insurance Marketplace, complete the 1095A screen in the Health Care folder for the premiums reported on Form1095-A, and enterXin theApply to SE Health Insfield for all applicable months.
- If the taxpayer has specified premiums and is claiming the premium tax credit, the PTC Worksheets W, X, Simplified Calculation, Y and Z are produced, if applicable, to determine the appropriate self-employed health insurance deduction including any deduction allowed for nonspecified premiums paid in addition to specified premiums. These worksheets are based on the worksheets found in IRS Publication 974, Premium Tax Credit. As indicated in the publication, using the Simplified Calculation Method to determine the deduction and credit amounts is optional. If the taxpayer is eligible for both a self-employed health insurance deduction and PTC for the same premiums, you may use any calculation method that satisfies each set of rules, as long as the sum of the deduction claimed for the premiums and the calculated PTC, taking the deduction into account, is less than or equal to the premiums.
Medical insurance to Schedule A
Use this field only if the shareholder's medical insurance was not on the shareholder's W-2 issued by the S Corporation. Amounts you enter here show as medical and dental expenses on Schedule A. Don't enter the amount again on the A screen. If using basis and the amount was on the shareholder's K1 as other information, instead of as a shareholder distribution, enter an amount in the
Medical insurance subject to basis limitation
field in the K1-3 screen.note
Under Notice 2008-1, in order for a 2-percent shareholder-employee to deduct the amount of the health insurance premiums under IRC Section 162(l), the S Corporation must report the health insurance premiums paid or reimbursed as wages on the 2-percent shareholder-employee's Form W-2 in that same year. To report health insurance premiums deductible under IRC Section 162(1), enter the employee wage information on the W2 screen instead of this field. In the statement for the W2 screen Box 14, enter the medical insurance premiums using code 3 and indicate the K1 unit belonging to the eligible shareholder employee. See help for the W2 screen for additional information.
Self-employed long-term care premiums
Use the attached statement to enter eligible long-term care insurance premiums paid on behalf of the taxpayer, spouse, and/or dependents, applicable to this K-1 entity. The deduction is limited based on the age of the taxpayer, spouse, or dependents as designated by the code entered in the statement.
The deductible amount is applied based on the entry in the
T, S, J
field at the top of the K1 screen. If you select J
from the T, S, J
field, the deductible premium amount is split equally between the taxpayer and spouse. The Self-Employed Health Insurance Deduction Worksheet showing the calculation prints when applicable. The amount not allowed, as a deduction for Page 1, line 29 of the 1040 return automatically transfers to Schedule A as a medical deduction.The codes that are available in the
State Use
field in the attached statement are specific to the state postal code entered in the State
field. If state use codes are not applicable to the entered state, state use codes will not be available. note
- You'll need to enter a date of birth for the taxpayer or spouse for the deduction to calculate.
- If you enter long-term care premiums for the taxpayer or spouse for multiple activities, the total deduction is limited to the maximum allowed, based on the age of the taxpayer and spouse at the end of the year. However, the deduction isn't limited for dependentsif the data is entered for multiple activities. Therefore, if you enter dependent data for multiple activities, don't enter more than the allowable limit for each dependent based on their age. Review the limits shown above. This doesn't apply if you enter data for only one activity.
Dependent care benefits
Enter the dependent care benefits reported on the Schedule K-1 for this entity. Amounts you enter here go to Form 2441, line 12. Amounts are subject to basis or at-risk loss limitations, if applicable.
Other deductions
Use the attached statement to enter amounts to report separately on Schedule E, Page 2. Amounts here are subject to basis and at-risk limitations, if applicable. The calculation of self-employment income deducts amounts with type code
1
for Schedule SE and other earned income calculations, if applicable. These amounts are subtracted from Net earnings (loss) from self-employment on the K1-4 screen.note
Enter all auto information through the Asset tab. Auto expenses appear on Schedule E, Page 2 as "UPE" (unreimbursed partnership expenses). (Enter unreimbursed partnership expenses in the K1-6 screen.) The self-employment income calculation for Schedule SE and other earned income calculations also deducts auto expenses, if applicable. Auto expenses are subtracted from the amount in the
Net earnings (loss) from self-employment
field in the K1-4 screen. To support auto expenses claimed on Schedule E, an Auto Worksheet prints for any K-1 activity that contains auto information.