13852: 1065 - Section 754 Allocations

To Allocate §754 Depreciation Among Partners:
Indicate an amount of §754 depreciation using one of the following methods:

1. Select 754 from the drop list in the For: field on the 4562 screen, or
2. Enter the amount directly on screen DED. Enter the amount of §754 depreciation on line 16b (“Depreciation claimed elsewhere on return”), or
3. Open screen K. Choose the Deductions tab at the top of the screen.On line 13e Other Deductions, Code ZZ, Section 754 depreciation/amortization enter the amount of §754 depreciation to be reported to the partners.
   
   • In Drake22 and prior, the entry is made on line 13d Other Deductions, Code W, Section 754 depreciation/amortization instead.
     

To activate special allocation of the section 754 depreciation to the individual partners, use the SA link to the right of the field in option 3 above. If the SA link is not used, the depreciation will be allocated to the partners based on a pro-rata calculation of the partner's ownership percentage. 

To Prepare an Election Explanation Statement:
After the above screen(s) have been completed, select Yes to question 10a on Schedule B (B screen). Select the Elec Screen link to create the supporting election statement. On the ELEC screen select 21 - (Section 754 Election Statement) from the Election field and complete the information as needed. In View/Print mode, see Statement EL21 or the STATEMENT page (if you do not have the option selected to print only one overflow statement per page in Setup > Options). 

For more information, review the IRS Questions and Answers about the Substantial Built-in Loss Changes and the FAQs. 

In Drake17 and prior, select Yes to question 12a on Schedule B (B screen).

Note: Because the §754 depreciation is included in the same code as other deduction amounts, a Supplemental Information Statement might be necessary to indicate what line 13 other deductions are for the partners. To display and print the supplemental statement, see Related Links below.