Client is partnership with brother-in-law and received a K1 with SE earnings of $60093. Also has a Sch C(same type of work as the partnership but 1099 was reported in client's ss#).Paid health ins of $9931 for family. Sch C has a net profit of $1470.Can the K1 inc be combined with the Sch C income as for as calcaluating the health ins deduction or will it be limited to the Sch C income.
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In a Chief counsel advice it was stated that an insurance policy need not be in the name of the business for a Sch C filer in order to be deductible as an adjustment to income on form 1040. However it said that if the policy was purchased by a 2% or more shareholder employee of an S Corp it would be treated like a partner of a partnership. The long and short of it is if the policy is not established under the partnership name it does not qualify for the self employed deduction. It is some strange convoluted reasoning because I don't think the code puts the restriction on the deduction the IRS is determined to. I believe it's the same knuckleheads who wrote the provison dealing with underwear.
They are so worried about the fact that taxpayers deducted 9 billion for non cash contributions in a recent tax year. Oh my! That equates in tax revenue the money our government wastes in a single pork project. -
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If the partnership established the health ins would it have to cover both partners.Comment
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Yes and no. I don't know what your state may dictate. But let's say one partner had health insurance through his spouse I would assume he/she could opt out of the plan.Comment
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