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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16576
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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My name is ***** *****. I am working on a 1065 and have a

Customer Question

Hi my name is ***** *****. I am working on a 1065 and have a sale of a section 179 asset. I understand the mechanics and reporting requirements of the sale itself, however, I am trying to figure out how I need to account for the amount on Schedules M-1 and/or M-2. I have seen some info that says I do put the amount on M-1 (I had put it on Line 6a but not sure if I report it there or in Line 4a) Also, I am not sure if I need to account for it on M-2, and if so, where, and as a positive or negative number ??
JA: Thanks. Can you give me any more details about your issue?
Customer: The amount of the 179 recapture is $7,500.
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Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.

Thank you for your question.

Schedule M-2 is only on the partner capital accounts -- this is not an entry that would impact the partner's equity account.

On Schedule M-1 you would use line 4a like you had selected.

Please let me know if you need anything additional. If not, please rate positive.

Customer: replied 1 year ago.
Please confirm............put it on Line 4a, or 6a...............I had it on Line 6a and maybe that is why I am having an issue. Do I put the 7,500 on the line you suggest as a positive number, or a negative number ??On my M-1, my Line 9 (Income) is (14,865)........I am trying to get to the correct number on Line 1.....................I believe that that number will flow to Line 3 on my M-2.
Expert:  Megan C replied 1 year ago.

If reconciling to book, it will be a positive adjustment -

And yes, about line 3

Please let me know if you need anything additional. If not please rate positive.

Customer: replied 1 year ago.
27 February 2016 06:13Please confirm............put it on Line 4a, or 6a...............I had it on Line 6a and maybe that is why I am having an issue
Expert:  Megan C replied 1 year ago.

I already said - line 4a

Please let me know if you need anything additional

Customer: replied 1 year ago.
Sorry, I was out of commission for a while........
I am still confused as to why this M-1 adjustment would be put on Line 4 "Expenses recorded on books this year not included on Schedule K, Lines 1 through 13" ??? I have a 7,500 gain on the sale of this 179 asset. So why am I NOT supposed to put the entry on M-1 Line 6a "INCOME recorded on books this year not included on Schedule K Lines 1 though 11 ?????Please advise as to which is correct and why ???
Thanks,
Chris D