1065-US: Allocating section 179 expense to a partner who is an estate or trust (FAQ)

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Question

Why is section 179 expense not allocated to a partner who is an estate or trust?

Answer

The Form 1065 instructions for Schedule K-1, line 12 state, "Do not complete box 12 of Schedule K-1 for any partner that is an estate or trust; estates and trusts are not eligible for the section 179 expense deduction." The section 179 expense for the remaining partners is not adjusted for the amount that would have been allocated to the estate or trust.

Per Regulations section 1.179-1(f)(3), "the partnership's basis in section 179 property shall not be reduced to reflect any portion of the section 179 expense that is allocable to the trust or estate. Accordingly, the partnership may claim a depreciation deduction … with respect to any depreciable basis resulting from the trust's or estate's inability to claim its allocable portion of the section 179 expense."

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