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Surgery Center K1

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  • Surgery Center K1

    Hello, I have a surgery center ownership for which I receive a K1. In box 13 is a $10,400 amount along with the letter W. The extra info on the next page of the K1 tells me this amount is "743b amortization". I recall from many previous years that this has to do with some kind of depreciation from the center that is passed through to the partners - maybe depreciation from the building itself or from the assets of the corporation. In every previous year, this amount would essentially reduce my reportable income by appearing in Schedule E 28b non-passive loss and reducing the amount of the K1 income that ended up flowing through to my taxable income.

    However this year my accountant says "If it were a business expense, it would have been included in box 1 to calculate the partnership income or would appear on another line on the Sch K-1 or be coded another way. Line 13W expenses are passed through to the partner level and are treated at the partner level as an expense related to owning a portion of the partnership rather than a business expense of the partnership. Having it coded 13W makes it a harder expense to deduct."

    Previous accountants (and also this same guy in many prior years) seemed to treat this as a clear straightforward deduction and not even a gray area. Is it possible for anyone to tell me their opinion, is this a clear Yes or No or a Maybe that I need more info from the Surgery Center's accountant exactly what this represents to get a clear answer. My accountant did use this number on the Partner's Basis Worksheet but my question is should it be in Schedule E 28b as a non-passive loss. Thank you!

  • #2
    I’m sorry I don’t have an answer to your question.

    As I dig further into my real estate partnership K1, I am finding more and more quirks to taxation of partnerships. The way depreciation gets allocated, the way income gets distributed, the possibility of phantom income…. There are so many complexities. This serves to increase my desire to keep more of my ventures totally owned by me to reduce complexity.

    Hopefully someone can chime in with an answer to your original question.


    • #3
      I think using an accountant is very wise here.