Interest paid to acquire a partership

[Bjorn]

I'm looking for proof it is allowable to lower SE tax by the amount of interest paid to acquire a partership. Of course most of our software does a good job of claiming the interest on the back of the schedule E. This does a nice job of lowering the federal and state income.

My software says there is nothing in writing on the issue so they go with having the accountant over ride the SE income.

The word on the street is it is fine to lower SE income. The dollars are substantial so I need code sections and rock solid proof before I claim this deduction.

Mahalo

Bjorn

[Gretel]

I'm looking for proof it is allowable to lower SE tax by the amount of interest paid to acquire a partership. Of course most of our software does a good job of claiming the interest on the back of the schedule E. This does a nice job of lowering the federal and state income.

My software says there is nothing in writing on the issue so they go with having the accountant over ride the SE income.

The word on the street is it is fine to lower SE income. The dollars are substantial so I need code sections and rock solid proof before I claim this deduction.

Mahalo

Bjorn

Bjorn, don't know if this helps any. It's from Pub. 550.

Pass-through entities. If you use borrowed funds to buy an interest in a partnership or S corporation, then the interest on those funds must be allocated based on the assets of the entity. If you contribute to the capital of the entity, you can make the allocation using any reasonable method.
Additional allocation rules. For more information about allocating interest expense, see chapter 4 of Publication 535.