Inputs which flow to 1065 Schedule B (Updated for Tax Year 2023)

To input Optional Basis Section 743(b) / 734(b) adjustments line 10b and 10c:

1. Go to General > Basic Data worksheet.
2. Expand section Optional Basis Adjustment.
3. In column Code, verify the correct code has been selected.
4. In column Transferee Name, verify information has been entered.
5. In column Transferee's ID Number, verify the identification number has been entered.
6. In column Amount, verify the amount has been entered.
   • Positive 743(b) numbers appear on Schedule B line 10b, left amount field.
   • Negative 743(b) numbers appear on Schedule B line 10b, right amount field.
   • Positive 734(b) numbers appear on Schedule B line 10c, left amount field.
   • Negative 734(b) numbers appear on Schedule B line 10c, right amount field.
   • Each Optional Basis Adjustment entry will be itemized in a statement.
7. In column Property Class, input a description.
8. Select Detail.
9. In line Partnership Properties to Which Adjustment has been Allocated, input applicable property description(s).
10. In line Computation of the Adjustment (open text box), input applicable information for Sch B, line 10d statement requested.  
11. Calculate the return.

To input Substantial Basis Section 743(b) adjustments line 10d:

1. Go to General > Basic Data worksheet.
2. Expand section Optional Basis Adjustment.
3. In column Code, verify the correct code has been selected.
4. In column Transferee Name, verify information has been entered.
5. In column Transferee's ID Number, verify the identification number has been entered.
6. In column Amount, verify the amount has been entered 
   • Net positive and negative 743(b) / 734(b) numbers are reported on Schedule B line 10d.
   • Each Substantial Basis Adjustment entry will be itemized in a statement.
7. In column Property Class, input a description.
8. Select Detail.
9. In line Partnership Properties to Which Adjustment has been Allocated, input applicable property description(s).
10. In line Computation of the Adjustment (open text box), input applicable information for Sch B, line 10d statement requested. 
11. Calculate the return.

Note

• 2023.02070 / 2023-2.7 - An issue with worksheet view ability to see Substantial Basis steps 9 and 10 input is a work in progress with development. Fields can receive input, but the input fields are blocked from view.

Inputs which flow to 1065 Schedule B (Tax Year 2022 and Prior)

To input Optional Basis adjustments:

1. Go to General > Basic Data worksheet.
2. Expand section 3 - Other Information.
3. Navigate to grid 17.
4. In Column Optional Basis Amount, input applicable amount.
   • Positive 743(b) numbers appear on Schedule B line 10b.
   • Negative 743(b) numbers appear on Schedule B line 10b.
5. Calculate the return.

To input Substantial Basis adjustments:

1. Go to General > Basic Data worksheet.
2. Expand section 3 - Other Information.
3. Navigate to grid 19.
4. In Column Amount, input applicable amount.
   • Positive 743(b) numbers appear on Schedule B line 10c.
   • Negative 743(b) numbers appear on Schedule B line 10c.
5. Calculate the return.

Inputs which flow to Form 1065 Schedule K and partner K-1s

Method 1: Asset Detail

1. Go to Income / Deductions worksheet.
2. Select applicable Business / Rent and Royalty.
3. Expand section Depreciation and Amortization.
4. Select Detail.
5. In lines Description, Date in Service, Method, Life/rate, and Cost Basis, input applicable information as bare minimum.
6. In line Ratio ID, input a unique number.
   • The same Ratio ID number can be used on multiple assets.
7. Go to Special Allocations > Special Allocations worksheet.
8. Expand section Ratio Allocation.
9. In column Ratio ID Number, input the unique number assigned to the 743(b) depreciable asset.
10. In column Depr/Amort Code, select from the F4 Lookup Value option 4 - Section 743(b) Dpr. / Amort.
11. (Optional) In grid 11, enter partner number(s) and decimals or amounts in the applicable Ratio [#] column, if the 743b deduction of the asset(s) should only flow to specific partners.
12. Calculate the return.

Method 2: Total Override

1. Go to Income / Deductions - Schedule K Overrides.
2. Expand section 1 - Schedule K Income Overrides.
3. In line 28 - Section 743(b) positive adjustments, input applicable amount.
   • Specially allocate this entry with code 5922.
4. Expand section 2 - Schedule K Deductions Overrides.
5. In line 22 - Section 743(b) negative adjustments, input applicable amount.
   • Specially allocate this entry with code 5215.
6. Calculate the return.

Note:

• If 1065 Schedule B lines 10b, 10c, 10d are answered No, then the statement listing the 743(b) optional or substantial adjustments will not be prepared.
  • General > Basic Data worksheet > section Other Information > If No is selected in these lines: 
    • Line Did the partnership make an optional basis adjustment under Section 743(b)?
    • Line Did the partnership make an optional basis adjustment under Section 734(b)?
    • Line Is the partnership required to adjust the basis of partnership assets under Section 743(b) or 734(b) because of a substantial build-in loss of substantial basis reduction?
• If a 743(b) asset is entered with Method 1 above, then Schedule K-1 box 20 Other Information will report a statement: 
  • Tax year 2021 forward: Code U "Section 743(b) Basis Adjustment" will be created on Line 20U.
  • Tax year 2020: Code AH "Section 743(b) Basis Adjustment" will be created on Line 20AH..
• Schedule K-1, Line 20AH / 20U statement will be suppressed if any of the following inputs are made:
  1. 1. 1. Method 2, step 5 above suppresses for all partners.
        2. Partners > General Options worksheet > section Schedule K-1 and K-3 Options > line Suppress the Schedule K-1 Section 743(b) basis adjustment statement for box 20, code U, this checkbox also suppresses for all partners.
        3. Partners > Schedule K-1 Overrides worksheet > Detail > section Other Deductions > line L13V Section 743(b) negative adjustments, this input suppresses the statement for specific partners.
• Beginning with the 2020 Partnership system, Section 754 and 743 deductions are included in calculating Schedule K-1, Item L, Current Year Net Income (Loss) by default. To change this default, please see article 203400 in the Additional Information section below.