Margin interest

[wellhopper]

Unable to correctly account for margin interest in TurboTax Business 2022. My LLC's margin interest exceeds the income & per all IRS, etc guidelines MUST be carried forward via Form 4952...I'm unable to "Add Form"4952. Neither I nor TurboTax support are able to find a work around for this.

[tagteam]

Multi-member LLCs do not file Form 4952 in conjunction with their Form 1065.

The figure will appear on your K-1 (Line 13 with an H code) for entry into your individual income tax return (on Form 4952).

See https://www.irs.gov/pub/irs-pdf/f4952.pdf

Who Must File
If you are an individual, estate, or a trust, you must file Form 4952 to claim a deduction for your investment interest expense.

[wellhopper]

I should add that all IRS guidance that I could find says that it must be accounted for at 'the partnership level' until able to report via K-1 to partners.

[wellhopper]

Thanks for the reply but I've already explored that route (as did support) & since my LLC files as a partnership that route is NOT available...see my add on reply posted just now.

[Mike9241]

4952 instructions

Who Must File
If you are an individual, estate, or a trust, you must file Form 4952 to
claim a deduction for your investment interest expense.

you must report the investment interest on the partnership return. but form 4952 is not required to do this. the purpose of the form is to limit the deduction, if necessary, but the limitation only occurs at the individual, estate or trust level.  the IRS knows all it needs to know, the amount to be allocated to partners, from the entry on schedule K line 13b

[wellhopper]

Again thanks, BUT there will NOT be an entry on said line or any other line of the partners' K-1 until the deduction is finally resolved "in the future at the partnership level" which can ONLY be done by filing a Form 4952 'at the partnership level' which then carries it forward, etc. As stated in the original post TurboTax support & I spent an hour+ trying to find a work around to the program!

[tagteam]

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@wellhopper wrote:

....BUT there will NOT be an entry on said line or any other line of the partners' K-1 until the deduction is finally resolved "in the future at the partnership level" which can ONLY be done by filing a Form 4952....

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No, sorry, but you're wrong (so is Support if they told you that). Form 4952 is not filed with a 1065. 

The deduction is passed through the partners (members) on Line 13 (H Code) of the K-1s (1065). Each partner (member) then enters that figure in their individual income tax returns (which does get reported on Form 4952 at that point).

[tagteam]

Line 13H - K-1 (1065):

Code H. Investment interest expense. Include this amount on Form 4952, line 1. 

For more information on the special provisions that apply to investment interest expense, see Form 4952 and Pub. 550, Investment Income and Expenses.

[tagteam · Accepted solution]

[wellhopper]

Sorry I took so long to answer as I was 'testing' the various solutions in my return. I'm happy to report that I'm following your solution! It's what I did last year before I went in the weeds this year when I discovered IRS 'Basic Q&A to limitations...' dated 10 Jan 2023. Go figure!

For those following this thread, I have a storied 60+ year relationship with the IRS & 30+ years with TurboTax so I check & triple (at least) check my returns. I'm happy to award 5 stars to this solution! Thanks again Champ!