How do I generate Form 8990 and 1.163(j) elections in a 1065, 1120S or 1120 return using worksheet view?

  • Article Type:
  • How To
  • Last Modified:
  • 07/25/2019

Objectives

To generate the Form 8990 for the Limitation of Business Interest Expense Subject to 163(j) in a 1065 Partnership, 1120S S Corporation or 1120 Corporation return using the worksheet view.
To generate the 1.163(j) elections.

Environment

  • CCH Axcess Tax
  • CCH ProSystem fx Tax
  • 1065
  • 1120S
  • 1120
  • Form 8990
  • 1.163(j)
  • worksheet

Procedure

To prepare Form 8990, do the following:
  1. Go to the Income/Deductions > 8990 - Interest Expense Limitation worksheet.
  2. Select Section 1 - Form 8990 - Limitation of Business Interest Under Sec. 163(j)
    • In Line 1 - Preparation Code, use the lookup value (double-click or press F4) to the applicable option.
  3. Calculate the return.
To opt out of the Section 163(j) election and update assets automatically, do the following:
  1. Go to the Income/Deductions > 8990 - Interest Expense Limitation worksheet.
  2. Select Section 1 - Form 8990 - Limitation of Business Interest Under Sec. 163(j).
    • In Line 21 - All taxpayer activities are subject to Section 163(j), use the lookup value (double-click or press F4) to select yes if all activities are subject to Section 163(j). Note: Do not use this field if you are just wanting to produce update the assets.
    • If all taxpayers are not subject to Section 163(j), continue to Line 21.
    • In Line 22 (Grid) - Activities Subject to Section 163(j), do the following:
      • In the Entity Code column, use the lookup value (double-click or press F4) to select the applicable code.
      • In the Entity Number column, enter the appropriate entity number.
      • In the Opt Out column, select the checkbox.
  3. Calculate the return.
Notes:
  • Rental property depreciation will now flow to Form 8990, Line 11 on release 2018.03010.
  • Section 179 will now be included on Line 11 on release 2018.03040.
  • Assets for current and prior years with method M and life of 39 will update to ADS and 40.
  • Assets for current and prior years with method M and life of 31.5 will update to ADS and 40.
  • Assets for current year with method M and life of 27.5 will update to ADS and 30.
  • Assets for prior year with method M and life of 27.5 will update to ADS and 40.
  • Assets for prior year with method MSL, life of 15, and a Real Property section 179 code of 1, 2 or 3 will update to ADS and life of 39.
  • If you need to make an opt out election for new assets after an initial opt out was done, you will need to delete and re-enter the grid information on the 8990 worksheet. Make sure to calculate after deleting, prior to re-entering the data.
  • Asset Calculation: We changed ADS to calculate depreciation using the remaining ADS life and remaining basis.  This is due to the 8990 subject to business interest expense.  Clients that are subject to this and opt out of this are required to use ADS.  Any assets that switch to ADS method are required to be calculated this way.  If the accumulated depreciation is correct, the ADS depreciation should be the same when using the tables and when using remaining life and remaining basis. (For example: The asset would calculate as follows. 50,215 - 35,886 = 14,329.  You then take 14,329 divided by 4.5 (remaining life) = 3,184.) 

To prepare the election statement for Real Property, Trade or Business, or Farm, do the following:
  1. Go to the Income/Deductions > 8990 - Interest Expense Limitation worksheet.
  2. Select Section 2 - Election for Section 163(j) - 9.
  3. In the grid, do the following:
    • In the Description of Electing Trade or Business column, enter a description.
    • In the NAICS Code column, use the lookup value (double-click or press F4) to select the applicable code.
    • In the Election Code column, use the lookup value (double-click or press F4) to select the applicable code.
  4. Calculate the return.
Note: The election will not appear under the Federal Elections icon, however, it will print after any other Federal Elections in the return.

To prepare the election statement for small business taxpayer, do the following:
  1. Go to Partners > General Options worksheet.
  2. Select Section 1 - Schedule K-1 Print Options.
    • In Line 19 - Print the IRC Sec. 163(j) statement of election for small business taxpayers, select the checkbox.
  3. Calculate the return.

Note: This will print a statement on the Federal Schedule K-1 called IRC Sec. 163(j) Business Interest Expense Limitation.

To suppress Worksheets A & B in a 1065 return, do the following:
  1. Go to the Income/Deductions > 8990 - Interest Expense Limitation worksheet.
  2. Select Section 1 - Form 8990 - Limitation of Business Interest under Sec. 163(j).
    • In Line 2 - Suppress partner worksheets, select the checkbox.
  3. Calculate the return.
 

Additional Information

On release 2018.02040 (2018-2.4), the election for the assets is a manual adjustment.
On release 2018.02050 (2018-2.5), the election for the opt out is an automatic adjustment.
Form 8990 isn't an e-fileable form but on release 2018.02060 (2018-2.6) it will be an autogenerated PDF to attach with the electronic file.
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