Set up a separate K-1 in TT with the same EIN and use the same entity name but add "passive interest".
Walk through the questions and there should be a place that asks about interest expense. Make sure you indicate that this is a passive activity.
I recommend that you maintain your own separate tax basis schedule using excel or something similar.
See the attached from IRS Notice 88-37.
Interest expense allocated to a passive activity expenditure (within the meaning of 1.163-8T(b)(4)) of a passthrough entity should be entered on Form 8582 as a deduction from the activity in which such expenditure was made. The deductible amount (if any) of such interest expense, as determined under 1.469-1T(f)(2)(ii), should be reported in Part II of Schedule E. This interest expense should be identified on a separate line in column (a) as “passive interest,” followed by the name of the passthrough entity to which the interest expense relates, and the amount of such interest expense should be entered in column (f).
*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.
