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10719: Short Year Return


Fed Returns Generally

Can I do a "short year" return in Drake Tax?

Individual Returns (1040):

You cannot generate a short-year individual return in Drake Tax. Only a calendar-year individual return can be generated. There is no option to change this.

Business Returns (1120, 1120-S, 1065, 1041):

Drake Software produces short-year business returns that can be e-filed in the current year and two preceding years. A short-year business return older than two preceding years can be produced in prior versions of Drake Software, but it must be paper-filed.

Note: The return must reflect the laws and calculations applicable to the short-year period even though the software being used is the prior-year software. The program may not correctly calculate depreciation, gains, or losses for a short-year return. Depreciation for a short-year should be entered on screen 4562 and/or screens 6, 7, and 8; see note 321 for details. 

To generate a short-year return:

  • Enter the appropriate dates in the fiscal year fields on screen 1.

  • If this is an initial or final return, also check the box Initial Return or Final Return on screen 1
  • If this is not an initial or final return, you will need to make an short year election on the YEAR screen.
    • Note: 1041 returns do not support short-year elections or filing other than in the initial or final year. 
  • If appropriate selections are not made, EF messages will generate related to the above options: 
    • 0081 or 0084 for an 1120
    • 0720 or 0727 for an 1120-S
    • 0101 for a 1041
    • 1023 for a 1065

Short Year Elections 

Beginning in Drake15, in Corporate, S-corporate, and Partnership returns, the YEAR screen (MISC tab) is split from the ELEC screen to separate the short year election from other elections. You can use the YEAR screen to elect a 52-53 week year or to elect a short year for other reasons.

Note: In Drake14 and earlier software, go to the ELEC screen and select an explanation from the Other short-year reason drop list.

From data entry screen 1 (General Info) click the Year link to open the YEAR screen. You can also open the YEAR screen by typing YEAR into the screen, state or search phrase box on the Data Entry Menu.

  • To elect a 52-53 week year in the company’s first year, complete the first part of the YEAR screen. The required statement is produced.
  • If the short-year reason is "final year," take the following steps:
    1. On screen 1, enter the dates of the short year (20YY) in the Fiscal year begins and Fiscal Year End fields.
    2. Mark the Final return check box.
    3. Open the YEAR screen, and from the Other short year reasons drop list, select 09 - General Explanation.
    4. In the Explanation text box, type Current Year Software Not Available - Final Year.
  • if the reason is a change in tax year, take the following steps: 

    1. On screen 1, enter the dates of the short year (20YY) in the Fiscal year begins and Fiscal year ends fields.
    2. Open the YEAR screen, and from the Other short year reasons drop list, select 02 - Filed under Revenue Procedure 2006-45 or 2006-46.
      • No explanation is needed in the "Explanation" text box, but you may need to consider if Form 1128 should also be filed.
      • If Form 1128 is to be included, it must be completed and signed outside the program and attached as a PDF with Form 1128 for Short Period Return as the Description on screen PDF. 
  • To elect a short-year return for some other reason, that is not on the Other short-year reason drop list, select General Explanation as the reason, and in the Explanation field, type an explanation. Statement 1935 is generated in View mode.

  • Allowable reasons for short-year 1120 returns are:
    • National office grant letter
    • Filed under Revenue Procedure 2006-45 or 2006-46
    • Notation referring to Section 898 (c)(1)(A)
    • Election change in taxable year under Section 898 (c)(2)
    • Section 1398 election
    • Second short year after Section 1398 election
    • Section 444 election terminated
  • Allowable reasons for short-year 1120-S returns are:
    • National office grant letter
    • Filed under Revenue Procedure 2006-46
    • S Election termination or revocation is selected
    • Stmt on Qualified Disposition under Reg 1.1368-1(g)(2)(i)
    • Stmt on Termination of Shareholders Interest under Reg 1377(a)(2) and 1.1377(1)b
    • Stmt referring to S Election and taxpayer is changing to 12/31 calendar year end
    • Statement S corporation has come out of consolidation
    • The corporation is a qualified sub chapter S subsidiary 
    • Section 444
    • 1120-S Box A date matches Tax Period Begin Date
    • Section 1398 election
    • Second short year after Section 1398 election
    • Section 444 election terminated
  • Allowable reasons for short-year 1065 returns are:
    • Filed under Revenue Procedure 2006-45 or 2006-46
    • Section 444 Election Termination

Special Consideration for Short Year depreciation, gains, or losses

The program may not correctly calculate depreciation, gains, or losses for a short-year return. Depreciation for a short-year should be entered on screen 4562 and/or screens 6, 7, and 8. Short-year returns generate Note 321:

NOTE ON SHORT-YEAR RETURN DEPRECIATION OR AMORTIZATION. This return is
a short-year return based on the fiscal-year dates entered on screen
1. Depreciation, amortization, and gain/loss on sales of assets may
not calculate correctly. Review the amounts calculated by the program
and if necessary, override the amount of current depreciation or
amortization on the assets involved on the "Override Regular
Depreciation" line of the 4562 screen.

The depreciation allowance for MACRS personal property placed in
service in a short tax year is determined as follows:

(1) Multiply the property's depreciable basis by the applicable
depreciation rate
(2) Divide the number of months in the short tax year by 12
(3) Multiply the result in step 1 by the fraction from step 2

PERMANENT NOTE: The software produces this note based on information
in the return. It is not necessary to change data entry to eliminate
the note. This note is for informational purposes only.

See Publication 4163, page 24, for more information. Also See "Period Covered" in the form instructions for short-year returns:


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