Question

I am a limited partner at my firm. Where do I enter the partner loan interest payment amount? Should it not be deductible??

Forum|Forum|2 years ago
March 15, 2024
2 replies
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I need to enter the LP loan interest as a nonpassive loss on Schedule E, Part II, Line 28, Column (i) and describe as
Interest Expense, but how do I get it there?

TurboTax Online

Rick19744

When you say "limited partner", what exactly does this mean?

Is the entity a limited partnership in which you are truly a limited partner; not materially participating?
Is this an LLC filing as a partnership in which the limited partner box is checked and you are truly a "limited partner" or other LLC member; not materially participating?
Is this an LLC filing as a partnership in which the member-manager box is checked?
Aside from the above, it would be good to provide a few more facts.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

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greyleighandcamAuthor

Thank you for your response. As an employee at the LP in question, I am materially participating. “Limited partner or other LLC” is marked. All my LP income is nonpassive. In order to pay for my limited partnership offering, my employer offered a loan in which all income is directed until the loan is paid in full. This loan charges interest. It is listed on the K1 as Line 20ZZ - Partner loan interest, and the instructions say it needs to be reported as a nonpassive loss on Schedule E, Part II, Line 28, Column (i) and describe as Interest Expense. However, when I enter it under 20ZZ nothing happens, and the system will not allow me to enter it manually on Schedule E. What am I doing incorrectly? Thank you in advance.

Rick19744

The online versions of TT are not quite as flexible as the desktop versions; allowing to enter directly on a form.

My recommendation is to go into the applicable K-1 and go through the questions. As you address each screen, there should be a question regarding using debt to purchase your interest or something to that effect. This may require going into a "not common expense" section or something to that effect.

This is where you would enter that interest expense.

The interest expense should then be reflected on a separate line on your Schedule E titled "business interest".

I would then remove the box 20 entry input.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

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CocoG

@greyleighandcam Would this happen to be an Edward Jones K-1? Your question is exactly the answer I am needing. I paid $50 for the TurboTax Live support. To no avail. I spoke to two reps who also can’t assist. What did you end up doing?

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greyleighandcamAuthor

Yes, I have an Edward Jones K-1. The instructions Edward Jones gave did not work due to Turbo Tax online download limitations. I was given the following recommendations:

two options

1) enter on line 13zz and then describe what it is and enter the amount on the line that says nonpassive and will be reported on schedule E page 2

2) create another k-1 for the partnership but rather than using name of partnership (only use EIN) state "interest pd to buy partnership share" or use your own wording. then enter as a negative on line 1 and check material participation

I chose to compete step 1, and my Partnership loan payment showed up where it needed to be on the income tax form, and I received a tax deduction. To enter on line 13zz instead of 20zz you follow the same steps the Edward Jones gives. You will have to look at the Edward Jones instructions, but, off the top of my head, I labeled it something like Business Interest. Edward Jones says to use something slightly different, but is basically the same thing.

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CocoG

@greyleighandcam Thank you for your quick response!! Unfortunately I am using the desktop version. So.. it’s not giving me the option to add it as a non passive loss. I enter box 13zz and no deduction and nothing on Schedule E. I really appreciate your help. I may have to just do my taxes using the online version. Have a great weekend!