I got a K-1 from my LLC's partnership and it appears that my cpa did not expense the computer that the partnership bought in 2007.

He said that the partnership cannot deduct this and it has to be reported on my K-1? Is he correct?

I thought that this is a legitamate expense and it should be deducted on the LLC's partnership tax return.

I am hopelessly confused! Tks again!

The depreciation deduction for the computer was taken under section 179 deduction. This is a special election available to the partnership so that the entire cost of the computer is deducted in the year of purchase.

However, per IRS rules, this election of this deduction results in a beneficial deduction at the shareholder level and is included on the K-1. So, you are eligible for the computer deduction, and your CPA correctly included this deduction on your K-1.

The net effect is that instead of the partnership taking this deduction and showing a lower a taxable income at the shareholder level, the section 179 deduction is taken at the individual level and this will offset the taxable income from the LLC (without the depreciation deduction).

As a matter of fact, apart from the section 179 depreciation, there are several other special items of income and deductions that are also reported on the K-1. Some of these include the following;

1. Interest income from the LLC's.

2.Charitable contribution.

3.Dividends and capital gains/losses.

4. Royalties.

5. Net Rental income.

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