Taxpayer borrows $150,000 to invest in a partnership. The partner’s share of ordinary income reported on a K-1 is $25,000; they also have $30,000 of cash distributions and $20 of interest earned. The partner incurred $10,000 of interest expense on the loan. Is this deductible in full on Schedule E against the $25,000 of income or limited on Form 4952 to the $20 of interest? TTB 4-14 would lead me to think it’s deductible in full and references IRS Notice 88-37. Reading the notice it seems that it would be deductible only if the partnership was engaged in the business of buying and selling securities and the income was interest and dividends.
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In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de Tocqueville -
Yes
Deduct on Schedule E separately as business interest.Kevin Thurman, CPA -
Are you sure it doesn't get reported on Sch A as investment expense?Dave, EAComment
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What type of partner is the TP?Comment
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If memory serves well, then interest paid for an interest in a corporation is investment interest, while an interest as a general partner in a partnership goes on Sch. E, page 2.Comment
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He is an LLC member. The LLC owns a restaurant which is part of a regional chain making it a local rather than corporate owned store. He also works as a manager and recieves a W-2 from the corporate office, not the LLC. Since it's so much interest I'd like to offset the income.In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de TocquevilleComment
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Thank you all for your input.In other words, a democratic government is the only one in which those who vote for a tax can escape the obligation to pay it.
Alexis de TocquevilleComment
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Check out this link
TRACING INTEREST EXPENSE THROUGH PASS-THROUGH ENTITIES
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