K-1 from a partnership doing business as a trader in securities

[2626Beckwith]

I need help getting TurboTax to properly recognize two expenses in Box 13 without using overrides that then block my using an efiling.

1 -Code H in Box 13 is for Invst Inter Exp.  After this clears the limitations on Form 4952, it should flow to Sch E.  TT is flowing to Sch A as an itemized deduction.  What input change will fix this so it flows to Sch E?

2 -Code W in Box 13 is for other expenses that pass through to me as a partner.  The entry is NOT flowing anywhere in TT.  What input (not override) will fix this so it also flows to Sch E?

Thank you,

Steve

[phone number removed] pls feel free to call to make it easier to walk me through the work around.  I have lost a number of hours already.

[Irene2805]

To answer your questions:

1.  Investment interest expense deduction. The deductible amount from Form 4952 is reported on line 9, Schedule A (Form 1040) [Interest you paid], even if all or part of it is attributable to a partnership or S corporation.

2.  Other Expenses.  After entering the figures for Box 13, you will see a screen, Enter Code W Detail.  Mark the box Nonpassive Deductions to be Reported on Schedule E, page 2.  The figure will then flow to Schedule E, p.2.

[2626Beckwith]

Irene2805 -

First, thanks so much for replying.  I will be trying your advice in a bit but may I ask you a follow-up question in the interim.

I spoke with a former KPMG tax partner who advised that if the Ptnship is doing business as a trader in securities, then the pass through of invst inter exp should go to Sched E once it clears the limitation calc,  not to Sched A.  It is a business expense, not an individual itemized exp...and I heard the samething from Turbo Tax last year when I had the same problem.  Do you have a reference that I can look to for your decision to have this flow to Sched A?

Again, thanks for now,

Steve

[2626Beckwith]

Irene2805,

Your advice for "Other" expense did work so now it is flowing to Sch E.

For investment interest expense, I can share authoritative literature that I found that clarifies (a) your advice for this flowing to Sch A is correct if the business of the partnership is an "investor fund"; however, as mentioned, my partnership is a "trader fund" and interest expense that is allowable from Form 4952 should be an "above the line "expense impacting AGI by flowing through Sch E.  If I don't correct Turbo Tax to move this expense to Sch E, my taxes will increase by some $80.00.

Can you advise how to address this in TT?  If TT is not equipped to handle this, would you please advise how to request a refund of my TT costs this year?

Thank you in advance for your additional help,

Steve

[2626Beckwith]

Would you please let me know your response to the follow-up question that I submitted.  Thx, Steve

[2626Beckwith]

Good Mornings, Irene2805:

I realize that you may be personally impacted by COVID-19.  Hopefully not but, if so, would you please advise me about how to continue working with someone at TurboTax?  If you are still the correct person to work with, would you please provide a status update so that I can move forward and file my returns?  If possible, with your help I would like to file today or tomorrow.

Thank you,

Steve

[KathrynG3]

@2626Beckwith in order for the expense to appear on your Schedule E, page 2 from Box 13 Code H, it should be treated the same as Box 13 Code W. Code W is for deductions on Schedule E. Therefore, when the software prompts you to enter Code W information, you  could add the investment interest expense Code H and Code W in the same place.

For more details, see IRS Publication 550 Investment Income and Expenses page 35 How to Report Investment Interest Expense and page 68 Special Rules for Traders in Securities or Commodities.

Another option you have is, if you are a trade or business, and are reporting other expenses in connection with it on Schedule C, is to report that expense on Schedule C.