It appears in line 13 Other Deductions and is coded as "V"
This is a private equity fund and I am a limited partner. I used to work for the fund but not during this tax year. I did not materially participate so I assume this would be passive...however when I spoke with the fund accountant he indicated that they did the 743(b) negative adjustment in order to offset the capital gains in the fund. He suggested that I mark both of them passive or non-passive so they can offset as the fund had intended.
The issue is that when I add the cap gains they are auto marked as non passive. When I add the 743(b) adjustment it is auto marked as passive and suspended/disallowed. On Schedule E, line 28 it adds the deduction in column (g) but then also adds the exact same amount in column (h) as income. The resulting figure in line 32 is then zero.
If I enter the K1 line 13 deduction as W Other and and them mark it as non passive, it uses the deduction against the cap gains and works properly, but I am not sure if the IRS allows this.
Thanks so much for your help. This is confusing stuff.
