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S-Corp K-1 excess business interest expense

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    S-Corp K-1 excess business interest expense

    Client receives 1120-S K-1 with line 12-S $3100 Excess Business Interest Expense. IRS Q&A about limitation on deduction for business interest expense Question 15 says: "section 163(j) limitation is NOT allocated to its shareholder, but is instead carried over at the S corporation level to its succeeding taxable years." So why does the K-1 show the amount? Perhaps because the state does not follow IRS guidelines in this situation. As far as IRS is concerned the shareholder does not need to do any thing with this amount. But the state does NOT go along with IRS thinking and the amount should be subtracted from the Ordinary Business Income of $30,000. Also the S-corp annual gross receipts have been and are below $25 million. Am I correct in my thinking?
    Last edited by jmcdtax; 03-30-2020, 08:40 AM.

    #2
    What state?

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      #3
      The state is Wisconsin

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        #4
        Maybe it is that each shareholder has to calculate their own limitation if any. Kind of like Sec 179 for an S-corp, which is determined first at the entity level, then again at the pass-through level. Any given shareholder might have far different totals than the entity.

        What software?
        "You said it, they'll never know the difference. Come on, we'll paint our way out!" - Moe Howard

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