@bgbevan's discussion is super helpful, but I need help to implement "Theory" #2 in TurboTax desktop:
TurboTax appears to enforce "Theory" #1 [see TT Help for Form 8960 Worksheet Line 9b]. As a newbie, I don't see how to enter numbers on that worksheet that follow the IRS i8960 Line 9b guidance** without breaking the e-file checks.
In my experience, HR Block at Home Premium allows "Theory" #2, and its Help pages repeat the IRS i8960 Line 9b guidance. I successfully filed that way with HRB last year.
For other reasons, I would much prefer to file with TT, but the difference is big enough for me that I will use HRB again this year, unless there is a way to follow Theory #2 on Form 8960 in TT. Thanks for any pointers!
** the IRS-provided example of a 'reasonable method' in text above the Line 9b instruction allows "an allocation of the deduction based on the ratio of the amount of a taxpayer's gross investment income (Form 8960, line 8 ) to the amount of the taxpayer's AGI)"
