Drake Tax - 1040: 4562 Ownership Percentage (Return Note 135)
Article #: 15007
Last Updated: September 15, 2026
Return Note 135 is informational and generates when an ownership percentage is entered on Schedule E. Review the related 4562 screens to ensure that ownership percentage has not been entered as Business % use.
Ownership Percentage and Business Use
The Business % use field on screen 4562 does not represent ownership percentage. When a taxpayer owns less than 100% of an asset, allocate the asset's cost or basis, depreciation, and sale amounts to the taxpayer's ownership share before entering them on screen 4562.
Do not use Business % use to allocate ownership. Doing so indicates that part of the taxpayer's ownership interest was used personally rather than for business. If the asset is sold, the personal-use portion may flow to Form 8949 and Schedule D unless Do not carry personal portion to 8949 is selected.
If the taxpayer's entire ownership interest is used for business, leave Business % use blank. The default is 100%.
Example
A building has a cost of $200,000, and the taxpayer owns 50%. Enter $100,000 as the Cost / Basis on screen 4562. Leave Business % use blank if the taxpayer's entire ownership interest was used for business.
If the building is later sold for $400,000, enter the taxpayer's allocated sales price of $200,000 in the IF SOLD section.
Note If amounts do not divide evenly among owners, rounding may be necessary.
Reporting the Sale on Screen 4797
The sale may also be entered directly on screen 4797.
When using this method:
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Enter the Date Sold on screen 4562 to stop depreciation as of the date of sale.
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Leave Business % use blank if the taxpayer's ownership interest was 100% business use.
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Enter the taxpayer's allocated sale information on screen 4797.
Sale amounts must be properly allocated among the owners before they are entered.
Schedule E Ownership Percentage
For rental property:
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Select E in the FOR box on each related 4562 screen.
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Enter the applicable MFC at the top of each 4562 screen.
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On screen E, go to Property Info tab and enter the taxpayer's Ownership percent.
Note The Ownership percent field may also be used for tenancy in common (TIC) property.
Enter the total rental income and expenses on screen E. Drake Tax prorates those amounts based on the ownership percentage entered, so manual allocation is not required for those entries.
Important Screen 4562 and screen E handle ownership differently. On screen 4562, enter only the taxpayer's allocated share of the asset's basis and sale amounts. On screen E, enter the total rental income and expenses and use Ownership percent to have Drake Tax prorate those amounts.