Page 168 - BusinessStructures & Forms

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Recapture of low-income housing credit (codes E and F). If showing the information required in items (a) and (b) of the
recapture of part or all of the low-income housing credit is instructions for lines 1 and 3 of Part II of Form 8697. It must also
required because (a) the prior year qualified basis of a building report the amounts for Part II, lines 1 and 3, to its shareholders.
decreased, or (b) the corporation disposed of a building or part See the Instructions for Form 8697 for more information.
of its interest in a building, see Form 8611, Recapture of Look-back interest—Income forecast method (code J). If
Low-Income Housing Credit. Complete lines 1 through 7 of Form the corporation is closely held (defined in section 460(b)(4)(C)
8611 to figure the amount of the credit to recapture. (iii)) and it depreciated certain property placed in service after
Use code E on Schedule K-1 to report recapture of the September 13, 1995, under the income forecast method, it must
low-income housing credit from a section 42(j)(5) partnership. attach to Form 1120-S the information specified in the
Use code F to report recapture of any other low-income housing instructions for Form 8866, line 2, for the 3rd and 10th tax years
credit. See the instructions for lines 13a and 13b, earlier, for beginning after the tax year the property was placed in service. It
more information. must also report the line 2 amounts to its shareholders. See the
If a shareholder's ownership interest in a building Instructions for Form 8866 for more details.
TIP decreased because of a transaction at the shareholder Dispositions of property with section 179 deductions
level, the corporation must provide the necessary (code K). This represents gain or loss on the sale, exchange, or
information to the shareholder to enable the shareholder to other disposition of property for which a section 179 deduction
figure the recapture. has been passed through to shareholders. The corporation must
provide all the following information with respect to such
The disposal of a building or an interest therein will dispositions (see the instructions for Form 1120-S, line 4,
! generate a credit recapture unless it is reasonably earlier).
CAUTION expected that the building will continue to be operated • Description of the property.
as a qualified low-income building for the remainder of the • Date the property was acquired and placed in service.
building's compliance period. • Date of the sale or other disposition of the property.
• The shareholder's pro rata share of the gross sales price or
See Form 8586, Form 8611, and section 42 for more amount realized.
information. • The shareholder's pro rata share of the cost or other basis
Recapture of investment credit (code G). Complete and plus expense of sale (reduced as explained in the instructions
attach Form 4255 if, before the end of the recapture period, for Form 4797, line 21).
investment credit property is disposed of or no longer qualifies • The shareholder's pro rata share of the depreciation allowed
for the credit or if credit recapture is otherwise required. See the or allowable, determined as described in the instructions for
Instructions for Form 4255 for details about when credit Form 4797, line 22, but excluding the section 179 deduction.
recapture is required. State the type of property at the top of • The shareholder's pro rata share of the section 179 deduction
Form 4255, and complete lines 2, 3, 4, 10, and 11, whether or (if any) passed through for the property and the corporation's tax
not any shareholder is subject to recapture of the credit. year(s) in which the amount was passed through.
• If the disposition is due to a casualty or theft, a statement
Attach to each Schedule K-1 a separate statement providing indicating so, and any additional information needed by the
the information the corporation is required to show on Form shareholder.
4255, but list only the shareholder's pro rata share of the basis of • For an installment sale, any information the shareholder
the property subject to recapture. Also indicate the lines of Form needs to complete Form 6252. The corporation must also
4255 on which the shareholders should report these amounts. separately report the shareholder's pro rata share of all
The corporation itself is liable for investment credit recapture payments received for the property in future tax years.
in certain cases. See Investment credit recapture tax, earlier, for (Installment payments received for installment sales made in
details. prior tax years should be reported in the same manner used in
Recapture of other credits (code H). On an attached prior tax years.) See the Instructions for Form 6252 for details.
statement to Schedule K-1, provide any information Recapture of section 179 deduction (code L). This amount
shareholders will need to report recapture of credits (other than represents recapture of the section 179 deduction if business
recapture of low-income housing credit and investment credit use of the property dropped to 50% or less before the end of the
reported on Schedule K-1 using codes E, F, and G). The recapture period. If the business use of any property (placed in
following are examples of credits subject to recapture and service after 1986) for which a section 179 deduction was
reported using code H. passed through to shareholders dropped to 50% or less (for a
• The qualified plug-in electric drive motor vehicle credit reason other than disposition), the corporation must provide all
(including qualified two-wheeled plug-in electric vehicles and the following information.
new clean vehicles). See section 30D(f)(5) for details. • The shareholder's pro rata share of the original basis and
• The new markets credit. See Form 8874 and Form 8874-B, depreciation allowed or allowable (not including the section 179
Notice of Recapture Event for New Markets Credit, for details. deduction).
• The Indian employment credit. See section 45A(d) for details. • The shareholder's pro rata share of the section 179 deduction
• The credit for employer-provided childcare facilities and (if any) passed through for the property and the corporation's tax
services. See section 45F(d) for details. year(s) in which the amount was passed through.
• The alternative motor vehicle credit. See section 30B(h)(8) for See Regulations section 1.179-1(e) for details.
details.
• The alternative fuel vehicle refueling property credit. See Section 453(l)(3) information (code M). Supply any
section 30C(e)(5) for details. information needed by a shareholder to figure the interest due
Look-back interest—Completed long-term contracts (code under section 453(l)(3). If the corporation elected to report the
dispositions of certain timeshares and residential lots on the
I). If the corporation is closely held (defined in section 460(b)(4) installment method, each shareholder's tax liability must be
(C)(iii)) and it entered into any long-term contracts after February increased by the shareholder's pro rata share of the interest on
28, 1986, that are accounted for under either the percentage of tax attributable to the installment payments received during the
completion-capitalized cost method or the percentage of tax year.
completion method, it must attach a statement to Form 1120-S

-38- Instructions for Form 1120-S (2022)