CCH Software News - UPDATED INFORMATION - Current Guidance for Section 743(b) and Section 754 Adjustments on Schedule K-1, Item L and Schedule K-1 Tax Capital Reporting on Item L and Schedule M-2 for Partnership Returns using CCH® ProSystem fx® Tax.

  • Article Type:
  • Documentation
  • Last Modified:
  • 02/01/2021

Objectives

N/A

Environment

N/A

Details

CCH Software News - UPDATED INFORMATION - Current Guidance for Section 743(b) and Section 754 Adjustments on Schedule K-1, Item L and Schedule K-1 Tax Capital Reporting on Item L and Schedule M-2 for Partnership Returns

Dear CCH ProSystem fx Customer: 

On Wednesday, January 27, 2021, we provided information regarding the existing handling of Guaranteed Payments to Partners and adjustments pertaining to Section 743(b) and Section 754. 

We would like to make you aware that we are adding Office Manager selections to globally set the applicable treatment option to be used on Partnership returns. 

Available on Release 2020.02030, Sunday January 31 

Guaranteed Payments to Partners 

You can select the following options in Office Manager located at Configure Applications > Tax Preparation > Miscellaneous Options > Reserved for future use 1 field and enter the applicable option number from the following: 

The Schedule K, Line 4- Guaranteed payments for services and capital will be automatically included in the calculation of the Schedule K-1, Item L, Current year net income (loss). The options available on Partners > General options > Schedule K-1 Options > Other Calculation Options > Line 30 (Interview Form 5A, Box 94) will also affect the amounts reported on Schedule K-1, Item L. 
•    Option 1: Include all guaranteed payments in current year net income amounts - This is the default option and will include all guaranteed payments in the calculation of the current year net income (loss).
•    Option 2: Exclude all guaranteed payments from Schedule K-1, Item L and Schedule M-2 - No guaranteed payments will be included in the calculation of the current year net income (loss).
•    Option 3: Exclude guaranteed payments for services from Schedule K, Item L and Schedule M-2 – The guaranteed payments for services will be excluded from the calculation of the current year net income (loss).
•    Option 4: Exclude guaranteed payments for capital from Schedule K, Item L and Schedule M-2 - The guaranteed payments for capital will be excluded from current year net income (loss).

For example, Entering "2" will  exclude all guaranteed payments from Schedule K-1, Item L, Partner’s Capital Account Analysis and Schedule M-2 - no guaranteed payments will be included in the calculation of the current year net income (loss).
Available on Release 2020.02040, Sunday February 7 

Section 743(b) and Section 754 Adjustments 

You can select the following options in Office Manager located at Configure Applications > Tax Preparation > Miscellaneous Options > Reserved for future use 2 field and enter the applicable option number from the following: 
•    Option 1: Include section 743(b) adjustments in current year net income amounts - This is the default option and will include the section 743(b) adjustments in the calculation of the current year net income (loss).
•    Option 2: Exclude section 743(b) adjustment from item L - The section 743(b) adjustments will not be included in the calculation of the current year net income (loss). This would also be reflected on the current year net income and increase/decrease supporting statement where the other income or other deduction amount would change.
•    Option 3: Include Section 743(b) adjustment in other increase (decrease) – The section 743(b) adjustments will be included in the calculation of the other increase (decrease) amount and excluded from the calculation of the current year net income (loss). These changes will also be reflected on the current year net income and increase/decrease supporting statement where the other income or other deductions amount will also change and the section 743(b) adjustments will be reported as separate items under the other increase/decrease items.
•    Option 4: Exclude both section 743(b) adjustment and section 754 adjustments from item L - The section 743(b) adjustments will be excluded from the calculation of the other increase (decrease) amount and current year net income (loss).
•    Option 5: Include both Section 743(b) and 754 adjustments in other increase (decrease) – The section 743(b) and 754 adjustments will be included in the calculation of the other increase (decrease) amount and excluded from the current year net income (loss). These changes will also be reflected on the current year net income and increase (decrease) supporting statement.
•    Option 6: Include Section 754 adjustments in other increase (decrease) – The section 754 adjustments from Line 13w will be included in the calculation of the other increase (decrease) amount and excluded from the calculation of the current year net income (loss). These changes will also be reflected on the current year net income and increase/decrease supporting statement.

For example, Entering “4” will exclude adjustments from Schedule K-1, Item L, Partner’s Capital Account Analysis and Schedule M-2, Line 3 – Net income per books amount.
Schedule L, Partner’s Capital Account Analysis 

We are modifying the Schedule K-1, Item L – Partner’s Capital Account Analysis supporting statement to reflect that the basis method printed applies only to the beginning capital amount. The end of year capital account is now Tax Basis. 

Sincerely, 

Wolters Kluwer Tax & Accounting, North America 
 

Additional Information

N/A

  Solution Tools
  Attachments
 Solution Id 000120537/120537
 Direct Link
To provide feedback on this solution, please login.

Your feedback about this article will help us make it better. Thank you!