When a person has qualifying unreimbursed P-ship expenses do these expenses reduce only the taxable income or also the income subjuct to self employment tax?
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They also reduce the SE tax. -
Jesse, I assume you know that these expenses needs to be in the partnership agreement to be qualified.Comment
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Yes, thanks for the reminder.
Anyone have Proseries - I am using the supplement worksheet and it is decreasing the income but not the income subject to SE?Comment
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ProSeries
I use ProSeries and the partner supplement worksheet carries over to my SE. Have you entered the SE income from the K-1? It then should automatically carry to the bottom of this worksheet.Comment
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There is guaranteed payments for capital that is not being decreased. The partner has equipment that is owned by one partner and leased to the partnership. The K-1 has the lease payments as guaranteed payments. Can the partner take depreciation to reduce the income from the lease payments subject to SE?Comment
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That is a good question for which I don't have an answer. I hope someone else jumps in.Comment
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On the SE tax screen, or a related worksheet/screen, enter the UPEs as a subtraction from SE income. You may also wish to read the instructions for Schedule SE ... specifically the heading "Partnership Income or Loss."Roland Slugg
"I do what I can."Comment
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The lease payments
should not be reported as guaranteed payments. They should have been deducted as rent by the partnership and a 1099 generated to the partner as other income. If the partner is in the business of renting equipment it should go on a Sch C. If he is not in the business of renting equipment put the rent on line 21 of form 1040. Put the expenses on line 36. See page 7-5 of TTB.Comment
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Thanks again to both (all three) of you. Why didn't I think to look on the instructions for schedule SE?!
First I'm going to file an extension and make sure I can claim the depreciation against the SE income. If I can I'll enter in Part II line 6 of the Schedule SE adjustments worksheet and attach an explanation.
Why wouldn't you report as guaranteed payments?
I like your signature line!Comment
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Guaranteed payments
is the equivalent of wages, paid to a partner for services performed. See page SB4-5 of TTB. If you have the deluxe version. If you don't have it I highly recomend it.Comment
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I have my doubts if the rental payments to the partner can be treated as anything other than Sch. C income. I don't think he is in the business of renting equipment but I do think that he is deemed to be doing so since it is renting to a business where he materially participates in.Comment
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