K-1 Footnote: Section 163(J) Interest Expense Limitation

[mellynlee]

We have a limited partnership (a land investment that is NOT public), and the land was sold in 2021, so we received a distribution check, the partnership ended, and we received a final K-1. There is a page of Footnotes after the K-1, and one of them is titled Section 163(J) - Interest Expense Limitation

There are a lot of words and a few numbers in this section.

They list the "annual gross receipts for the 3 tax years preceding the current tax year" - so there are amounts listed for 2018, 2019, and 2020.

It says to "Please multiply the gross receipts above by your ownership interest in the partnership for each year to determine your share of annual gross receipts from this business activity. The Section 163(J) rules are complex...."

Do I need to do something with the numbers in this footnote, and is there a form in TT that I need to fill out to do this?

[Anonymous_]

You might want to contact Support for this issue.

What is the TurboTax phone number? (intuit.com)

Also @Mike9241 

[Mike9241]

I can't fully answer your 163(j) question because you have to go back to 2018.  163(j) went into effect in 2018 and reflects limitations on the deduction of excess business interest expense (EBIE). if there is any it would be on line 13K for 2018 through 2021. you should have received similar footnotes about it for all years after 2017

if 13K is zero for all those years just ignore the whole subject.

excerpt from IRC 163(j) 

(3)Exemption for certain small businesses
In the case of any taxpayer (translation the partner) which meets the gross receipts test of section 448(c)  (translation, if your share of the average gross receipts of the partnership for the prior 3 years is less than $25,000,000)  paragraph (1)  (translation, the limitation on the deduction of business interest shall not apply) to such taxpayer for such taxable year.  you are deemed a small business taxpayer

you are not subject to the limitation but you are required to file form 8990 which TurboTax does not do the form. if there is an amount on line 13K  or if you reported EBIE in any year 2018-2020 if there is a carryover. you need to file 8990. 

from 8990 instructions

Exclusions from filing. A taxpayer is not required to file Form 8990 if the taxpayer is a small business taxpayer and does not
have excess business interest expense from a partnership.  so if there's an amount on 13k you are required to file even though you are not limited 

why is this important

if subject to the limitation and reported/calculated properly from 2018-2020 your share of taxable income was increased or your share of tax loss was decreased by the EBIE - see prior year's forms 8990. however, your tax basis was reduced by the non-deductible EBIE. To the extent, there is unused EBIE in 2021 that increases your basis for determining gain or loss on disposition.   Turbotax does none of these calculations.

[mellynlee]

Thank you for your reply!

So, yes, I do have similar footnotes for 2018-2021 K-1's.

When you say to check if line 13K is zero, do you mean line 13 (Other deductions) in Part III of the K-1?

There is no 'K', and line 13 is completely blank.

Does this mean I can just ignore this issue?

Thank you!

[Mike9241 · Accepted solution]

When you say to check if line 13K is zero, do you mean line 13 (Other deductions) in Part III of the K-1? YES

There is no 'K', and line 13 is completely blank. GOOD

Does this mean I can just ignore this issue? YES. 

[mellynlee]

Thank you so much!!!