§ 179 RECAPTURE

[Lynn EA USTCP in Louisiana]

Sec 179 expense $24,000 was taken for a vehicle that is now 100% personal use. Entity is a corporation; the recapture is reflected on k-1. K-1 has been imported into individual return. At bottom of form 4797,page 2 is the line for Sec 179 recapture, but it doesn't seem to be flowing from there to the front page of the tax return.

What am I missing?

Thanks,

Lynn Jacobs, EA, NP

Enrolled Agent

Notary Public

Kenner, La

[RoyDaleOne]

First, there should not be any personal use of a corporate vehicle. How did this happen?

[Maribeth]

Sec 179 expense $24,000 was taken for a vehicle that is now 100% personal use. Entity is a corporation; the recapture is reflected on k-1. K-1 has been imported into individual return. At bottom of form 4797,page 2 is the line for Sec 179 recapture, but it doesn't seem to be flowing from there to the front page of the tax return.

What am I missing?

Thanks,

Lynn Jacobs, EA, NP

Enrolled Agent

Notary Public

Kenner, La

I believe that the 4797 does not know which form you originally deducted the §179 expense, so you have to manually add the recapture to the form from which you originally deducted the expense. If the §179 was on a K-1, then I would handle the income just as you handle the unreimbursed partnership expenses. Set up a additional entity, named §179 recpature or something like that, use the EIN of the pass-through entity and show the recapture on line 1. That should then take the recapture to Schedule E, page 2, and then to Page 1.

hth,

Maribeth

[jainen]

>>Sec 179 expense $24,000 was taken for a vehicle<<

I believe the 1120-S is in error, since listed property is not subject to Section 179 recapture. However, if the corporation is not your client there is probably nothing you can do to correct the K-1. Follow Maribeth's instructions if you are using the same software, or tweak it to get the same result. If it is not otherwise included on the K-1 or elsewhere, report the shareholder's personal use of the corporate vehicle as ordinary income on Line 21.