Re: How to report “passive activity interest expen...
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Returning Member

How to report “passive activity interest expense” for an investment in a limited partnership (with a K-1)

Hello,

 

After reading up on interest allocation rules, etc. last year we used a HELOC for funds to invest in a partnership (as limited partners, where we get a K-1).  

The interest expense should be a “passive activity interest expense”.  

 

Where can this be entered in TurboTax?  

 

If we had purchased a rental house, I can see where to enter that on schedule E, line 13.  

 

It LOOKS like it could go on the K-1 worksheet (in forms view) in Section A (Passive Activity Adjustments to Income or Loss - For Regular Tax Purposes), on line 1f (Interest expense).

But that cell is NOT editable (I can click on it, but can’t enter anything).  

 

Where can this interest expense be entered?  

Note: I understand this might become a suspended passive loss, etc.  Just trying to understand how to get it entered.  

 

 

Thanks

 

3 Replies
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Returning Member

How to report “passive activity interest expense” for an investment in a limited partnership (with a K-1)

Did you figure out a solution? I have the same problem. I don't know where to enter interest expense that is properly allocable to a passive activity (that provides a K-1).

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Level 15

How to report “passive activity interest expense” for an investment in a limited partnership (with a K-1)

Interest incurred for an investment in a "passive activity" generally doesn't qualify for the investment interest deduction (a schedule A deduction to the extent there is net investment income).  A passive activity is a business or trade in which you hold an ownership interest but in which you don't actually participate. However, you could use the interest to offset income you received from the passive activity.

 

the only way to get this entered as a passive expense is: 1) if the k-1 has an amount reported on lines 1, 2 or 3 to reduce income by the interest expense or increase the loss. this might result in a notice from the IRS because now the amount reported doesn't agree with the k-1 it got or

2)  use a second k-1 same EIN as the k-1 same name (shortened if needed) followed by "related interest exp"   this would get enter on the same line 1, 2 or 3 as shown on the actual k-1.   make sure to check form 8582 to see that the interest expense shows up. 

 

 

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Returning Member

How to report “passive activity interest expense” for an investment in a limited partnership (with a K-1)

Thanks. I'll try option (2) later tonight or tomorrow. (Option (1) is obviously not happening if it would trigger attention from the IRS!)

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