K-1 box 20 AX ZZ

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If the K-1 (1065, LP) box 20 includes the following codes:

A 15

AG* stmt

AX* stmt

ZZ stmt

On the following page, for code "AX", it states "THE PARTNERSHIP HAS NOT PROVIDED CAMT INFORMATION ON LINE 20AX BECAUSE NO REQUEST WAS MADE BY YOU IN THE CURRENT OR PRIOR YEARS." What should be entered for AX?

For code "ZZ", No specific for ZZ, only something like "FOR THE TAX YEAR ENDED DECEMBER 31, 2025, YOUR SHARE OF THE PARTNERSHIP'S ACCUMULATED PRODUCTION EXPENDITURES EXCEEDED
YOUR SHARE OF THE PARTNERSHIP'S TRACED DEBT. " Jan-Dec month, every month has an amount listed. So, what should be entered for code ZZ?

Can anyone please help? Thanks!

MelindaS1

Alumni - Intuit

AX - Nothing. You haven't told them you need Corporate Alternative Minimum Tax information, and it doesn't seem like you're filing a corporation tax return on Form 1120. This doesn't apply to you as a Form 1040 individual filer.

ZZ - Nothing. These are expenses you're not allowed to deduct, and may be required to capitalize (add to your investment basis). If that isn't something you know how to approach for this partnership investment, you'll need the help of an accountant. Reference:

Special Rules for Allocation of Interest to Property Produced by the Taxpayer

Uniform Capitalization Rules for Interest: Avoided Cost Method

The avoided cost method must be used to calculate the amount of interest that must be capitalized. In general under the avoided cost method, any interest that the taxpayer theoretically would have avoided if accumulated production expenditures (see Explanation: §263A(f)) had been used to repay or reduce the taxpayer's outstanding debt must be capitalized. For each unit of designated property, (see Uniform Capitalization Rules for Interest: Designated Property) the avoided cost method requires the capitalization of traced debt and excess expenditures. The traced debt and excess expenditure amounts are determined for each tax year or shorter computation period that includes the production period of a unit of designated property.

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wendy3152020Author

Level 2

Thank you very much! The only other interest expenses I deduct are the mortgage interest on my main residence. Would it affect my mortgage interest expenses on Schedule A for my main residence?

MelindaS1

Alumni - Intuit

No, this pertains only to the passthrough K-1 interest from your investment in the partnership, and doesn't intersect in any way with your Schedule A deduction for mortgage interest. You're good to go.

Unless...you tell me something highly unusual like you took out a home equity line of credit (HELOC) to purchase your investment in the partnership in the first place, in which case you can start here for deductibility of mixed-use mortgage interest.

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