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CCH Axcess Tax

Option to Include or Exclude Section 743(b) Adjustments or Section 754 Adjustments from Schedule K-1, Item L and Schedule M-2

These options can be entered in Tax but can also be entered in Office Manager/RCS > Miscellaneous options > Reserved for future use 2

Schedule K-1

Code 1 : Include section 743(b) adjustments in current year net income amounts

This is the default option and will include the section 743(b) adjustments in the calculation of the current year net income(loss).

Code 2 : Exclude section 743(b) adjustment from item L

The section 743(b) adjustments will not be included in the calculation of the current year net income(loss) and the current year net income and ending capital amounts will increase or decrease depending on whether the section 743(b) adjustment is a positive or negative income adjustment. This would also be reflected on the current year net income and increase(decrease) statement where the other income or other deduction amount would change.

Code 3 : Include Section 743(b) adjustment in other increase (decrease)

The section 743(b) adjustments will be included in the calculation of the other increase (decrease) amount and excluded from the calculation of the current year net income(loss), so the current year net income (loss) amount will increase or decrease depending on whether the section 743(b) adjustment is a positive or negative income adjustment and the other increase (decrease) amount will increase or decrease in the opposite way. These changes will also be reflected on the current year net income and increase(decrease) statement where the other income or other deductions amount will also change and the section 743(b) adjustments will be reported as separate items under the other increase(decrease) items on the statement.

Code 4 : Exclude both section 743(b) adjustment and section 754 adjustments from item L -

The section 743(b) adjustments will be excluded from the calculation of the other increase (decrease) amount and current year net income(loss), so the current year net income(loss) and ending capital amounts will increase or decrease depending on whether the section 743(b) adjustment is a positive or negative adjustment and a section 754 adjustment is present.

Code 5 : Include both Section 743(b) and 754 adjustments in other increase (decrease)

The section 743(b) and 754 adjustments will be included in the calculation of the other increase (decrease) amount and excluded from the current year net income(loss). The current year net income (loss) will increase or decrease depending on whether the section 743(b) adjustment is a positive or negative adjustment and section 754 adjustments are present on Line 13W and the other increase (decrease) amount will increase or decrease the opposite way. These changes will also be reflected on the current year net income and increase (decrease) statement.

Code 6 : Include Section 754 adjustments in other increase (decrease)

The section 754 adjustments from line 13w will be included in the calculation of the other increase (decrease) amount and excluded from the calculation of the current year net income(loss). These changes will also be reflected on the current year net income and increase(decrease) statement.

Schedule M-2

The Schedule K, line 11- Section 743(b) Positive Income Adjustment and Line 13d -Section 743(b) Negative Income adjustments and Section 754 adjustments will be automatically included in the calculation of the Schedule M-2, line 3, Net income(loss) per books thus the options will also affect the amounts reported on Schedule M-2.

Code 1 : Include section 743(b) adjustments in current year net income amounts

This is the default option and will include the section 743(b) adjustments in the calculation of the Schedule M-2, line 3, Net income(loss) per books.

Code 2 : Exclude section 743(b) adjustment from item L

The section 743(b) adjustments will not be included in the calculation of the Net income(loss) per books and the line 3 and line 9 amounts will increase or decrease depending on whether the section 743(b) income adjustment on Schedule K is positive or negative. The Schedule M-2, line 9 ending capital amount will also change.

Code 3 : Include Section 743(b) adjustment in other increase (decrease)

The section 743(b) adjustments will be included in the calculation of either the other increases amount on line 4 or the other decreases amount on line 7 depending on whether the section 743(b) income adjustment on Schedule K are positive or negative. The same amount will be excluded from the calculation of the line 3 - net income (loss) per books, so this line will increase or decrease depending on the section 743(b) adjustment on the Schedule K. These changes will also be reflected on the other increases and other decreases statement.

Code 4 : Exclude both section 743(b) adjustment and section 754 adjustments from item L -

Exclude both section 743(b) adjustment and section 754 adjustments from item L - The section 743(b) and section 754 adjustments will be excluded from the calculation of the Schedule M-2, line 3, Net income(loss) per books, so the ending capital amount on line 9 will also change.

Code 5 : Include both Section 743(b) and 754 adjustments in other increase (decrease)

The section 743(b) adjustments and 754 adjustments will be included in the calculation of either the other increases amount on line 4 or the other decreases amount on line 7 depending on whether the section 743(b) income adjustment on Schedule K are positive or negative and section 754 adjustments are present on Schedule K, line 13d. The same amount will be excluded from the line 3, Net income(loss) per books, so this line will increase or decrease depending on the section 743(b) adjustment(s) on the Schedule K and section 754 adjustments present on Schedule K, line 13d. These changes will also be reflected on the schedule M-2, line 4, other increases and line 7 other decreases statement.

Code 6 : Include Section 754 adjustments in other increase (decrease)

Include Section 754 adjustments in other increase (decrease) – The section 754 adjustments from the Schedule K, line 13d other deductions amount will be included in the calculation of the other decreases amount on line 7 and excluded from line 3, Net income(loss) per books. These changes will also be reflected on the schedule M-2, line 7 other decreases statement.