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Why is partners basis being reduced by interest expense when not subject to 163(j)?

Tolly
Level 3

The partnership and it's partners are not subject to sec 163(j). The partners basis is being reduced on the basis worksheet by the interest expense in addition to being reduced by the loss which includes the interest expense.

The interest expense is entered on line 4b of the worksheet. Since there was a loss nothing there is nothing on line 4a for partnership income. Then since line 4a less 4b is less than zero, the interest it is added to line 10 which is the partnerships loss.

The result is a reduction of basis for the interest twice.

Does the program need updated or am I missing something?

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11 Replies 11
sjrcpa
Level 15

Someone else reported this recently.


ex-AllStar
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Tolly
Level 3

It was me. I didn't get any reply's so I thought my title and explanation were not very good. So I tried again. At least I got a response this time!

I'm thinking it is a software issue.

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George4Tacks
Level 15

While in the client listing use Ctrl + L to start a ticket with Lacerte. You can actually attach a sanitized copy of the return. Clearly explain the problem and that will help them to correct program issues.

https://proconnect.intuit.com/community/accounting/help/sending-an-email-to-lacerte-support/00/4763


ex-AllStar
Tolly
Level 3

I could not get the e-mail service request to work. But I called and talked to  customer service. The person is not a tax specialist but we spent some time trying to figure out why it is calculating that way. One thing we noticed is that in the partner basis worksheet there is a place to enter "Business interest expense included in current year income or gain" which is new this year. An entry here would have seemed to enable me to make the basis correct but it did not go anywhere on the basis worksheet. However when I entered all the basis information manually (without any special entry for the interest expense) to the worksheet I get the correct basis even though the partners share if interest expense still shows up on line 4b of the worksheet.

The service rep is going to check on this and give me a call.

I suspect this is a software issue that needs to be addressed. I was not speaking with a software expert.

I will keep you posted.

I would be interested to know if anyone else has had this issue. I would think so unless no one else keeps track of basis.

LindsayJ
Level 1

I am having the same problem! Please let me know if you get a response!

WashCPA
Level 2

I am having the same problem too.  Have spent hours trying to figure out how to get the basis schedule to agree with the K-1.  Only think I can figure out that works is that for a partnership that is not subject to the limitation (due to sales level) if you put a -1 in that interest box on the basis schedule worksheet it overrides line 4b on the basis schedule to be zero and then everything will balance.  I do not feel good about needing to do and override and makes me think there is something about this interest limitation that I am not understanding.  If the partnership is below the $25M limit, then it should have no impact on the basis schedule calculations - correct?

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Tolly
Level 3

You are correct. The basis schedule is wrong for partners not subject to 163(j) limitations. It decreases basis for the partners share of the interest expense twice, so basis is incorrect by the partners share of the interest expense.

I fixed mine by going to the partner basis worksheet and inputting the correct numbers. The interest expense still shows up on line 4b but does not carry into line 10 so basis is correct.

I will try what you did and see if it works for me. That will be interesting.

As I posted earlier I spoke with Lacerte help. They could not resolve the problem which I understand because I believe it is a programming issue. The person told me she would look into it with others. I asked her to get back to me but I have heard nothing and it has been almost a week I think. That is a little disappointing. She could at least call me back and let me know they are trying if they are.

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Tolly
Level 3

WashCPA, 

Just tried your method of putting negative one in the basis schedule for the interest expense. it works except it increases the basis by $1.00. It leaves the interest expense off line 4b though which is good. 

My way works except the interest expense still shows on line 4b.

Either way it's not a big deal. You could always deduct the $1.00 if you want basis exact.

That line in the basis worksheet to input Business interest expense included in current year income or gain is new and there for a reason. My partnership has a loss.

They just need to fix this. In the meantime I may have to force the basis schedule. I looked and i don't see that it creates any problems.

That's all I got! Good luck.

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knorris
Level 2

Any resolution to the business interest expense on the partner basis worksheet?

 

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Tolly
Level 3

I have not heard anything back from Lacerte. Very disappointing after the the person told me she would call me back. I have not checked the program lately to see if it is fixed.

thughes2069
Level 1

Following to see if/when it gets fixed - it seems like business returns just aren't ready to even file yet if we have to override and check so many items manually. Feeling kind of abused after paying so much for this professional software and yet things are taking so long to get programmed.

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