If you are sure that this is a legitimate deduction then I would deduct it directly on the K1. the IRS has received a copy of the K1 and should be aware of the deduction. So deduct it from the amount that you are entering as the box 1 income and it will net out to the correct amount. Be sure that this is a legitimate deduction and save copies of everything that justifies the new entry.
When you are doing the state return you will have to manually add the income back in as regular income.
@Cmbmichael
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