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Partnership K-1 notes that rental income shown on K-1

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includes a deduction for interest...
Partnership K-1 notes that rental income shown on K-1 includes a deduction for interest expense allocable to debt-financed distributions made in a prior year--and that this is subject to Tracing Rules of Regulation 1.163-8T. Where/how does the amount of interest allocated to the individual partner get reported? Is it an adjustment to basis or reported on the tax return as increased rental income?
Submitted: 1 month ago.Category: Finance
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Answered in 3 days by:
3/18/2018
Financial Professional: Carter McBride, Financial Advisor replied 1 month ago
Carter McBride
Carter McBride, Financial Advisor
Category: Finance
Satisfied Customers: 1,029
Experience: Adjunct Professor
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Hey! I'm Carter, I'm a CPA and can help you with this.
There is not enough information to figure out where to deduct it. You need to talk with the client and find out how he spent the distribution. That will determine what type of deduction you can take under the tracing rules.
It's a really complicated tax issue, but Tax Adviser has an awesome article simplifying that I recommend. You can find that here:
https://www.thetaxadviser.com/issues/2007/nov/interestdeductionondebtfinanceddistributions.html
Let me know if you need anything else. If not, please leave a rating. Thanks!
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Customer reply replied 1 month ago
Thanks for replying, but I needed a faster response. Found the answer two days ago.
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