My LLC purchased a promissory note in 2017. Where do I report the expense on form 1065?

Purchasing a promissory note is never considered an expenses. It is either an asset or liability and you report interest income or interest expense. The value of your business is increased by the amount as an asset on your balance sheet.  

This information is only reported on 1065 schedule L if your business exceeds certain criteria (the software asks relevant questions).

If you qualify as a Dealer, then it is still only reported as a sale of business property when sold (never expensed when purchased). Some resources for this information:

• Business expenses do not include promissory note: https://taxmap.irs.gov/taxmap/pubs/p535-016.htm
• Investments, dealers and traders: https://www.irs.gov/taxtopics/tc429
• Good blog article summarizing the issue: https://finance.zacks.com/tax-implications-promissory-10510.html