179 Deduction subject to self employment

[jrjames]

I am using ATX to prepare both a 2007 partnership and an individual return. The partnership has zero income because of a 179 deduction. The K-1 however shows ordinary income 12,500 on line one. Line twelve 179 deduction shows 12,500 and line 14 self employment also shows 12,500. Can this be right? When I transfer it over to his personal return he has no income and no federal income tax but 1,500 in self employemnt tax. Is 179 not deductible for self employemnt tax purposes?

Thanks for your help.

[Jerry W]

That's correct. Deduction for 179 does not reduce partnership income since it is passed through to the partner(s). On the other hand, section 179 deduction for a schedule c is taken into account in arriving at the net income for SE.

JerryW

[David1980]

The 179 should reduce the SE income to 0.

"General partners should reduce this amount before entering it on Schedule SE by any section 179 expense deduction claimed, unreimbursed partnership expenses claimed, and depletion claimed on oil and gas properties. " - Schedule SE instructions.

Can the taxpayer not claim the 179?

[wendybooth]

I had this this week. I had forgotten to check general partner on the flow thru sheet for the partnership. The problem I am having I efiled the other partner (brother) earlier and this partner I can not create the efile because there is a value on line 3 and can not be efiled. The partner filed earlier this year was efiled and accepted with no problem. What changed?????

I can not for the life of me figure out what is the difference. I have sent to ATX with no avail.

[kcjenkins]

I assume you are referring to line 3 of the worksheet for line 2 (Sch SE). I have had that come up too, but I got around it by overriding line 3 to zero, then typing in the same wordage onto line 5 and putting it there. I have not had to do it this year, but I did it a couple of times last year, and had no problems from it.